Chrysler on Wednesday said it would spend US$300m on two existing transmission manufacturing facilities in Kokomo, Indiana, to build a new, highly fuel-efficient eight-speed automatic transmission for future Chrysler Group vehicles.

The largest investment in the US since Chrysler Group LLC was formed in June 2009 was granted a tax break by the city of Kokomo. The investment will fund the installation of equipment and special tooling to modernise both Indiana transmission plant one and the Kokomo casting plant.

“The project will extend the life of both manufacturing facilities and help retain nearly 1,200 jobs,” the automaker said.

Chrysler Group has licensed the manufacturing rights from Friedrichshafen, Germany-based ZF Group to build the new eight-speeder beginning in 2013. The purchase of transmissions manufactured by ZF is included in the deal.

”The new eight-speed transmission that we’ll be producing in Kokomo will transform our future product line, but equally important, ensures the future viability of our Kokomo facilities and our dedicated workforce,” said Chrysler manufacturing chief Scott Garberding.

“The new eight-speed automatic transmission will offer our customers refinement and comfort while achieving greater fuel economy and performance,” added powertrain chief Paolo Ferrero. “We look forward to integrating the new transmission into future Chrysler Group products and welcome its contribution to a corporate fuel economy improvement of more than 25 percent by 2014.”

Earlier this month, Chrysler Group announced that it would invest $43 million in new equipment and tooling to expand its operations in Kokomo to support production of the World Engine and improve processes for the 62TE transmission programme.