Chrysler's request to Kokomo officials said the investment will help retain 3,400 jobs in the city.
The company has added nearly 8,000 hourly jobs since leaving bankruptcy protection and invested almost $5.2 billion in its US factories.
The company hopes the nine-speed transmissions help the Dart live up to expectations. It was unveiled with much fanfare at the 2012 Detroit auto show, but only 25,000 were sold last year. Chrysler, owned by Italy's Fiat, had touted the sleek compact as the perfect blend of aggressive American styling and Italian technology. It was supposed to be Chrysler's first competitive compact since the 1990s.
Marchionne said the company mistakenly equipped the Dart with transmissions and engines better suited to European drivers than Americans. He said the nine-speed transmission would be more suitable to U.S. drivers because the added gears will help the car shift more smoothly and accelerate faster.Dart sales did pick up in January, rising to more than 7,100. The car is built in Belvidere, Ill.