DETROIT—Fiat Chrysler plans to convert an idled engine factory here into an assembly plant as part of the automaker’s plans to add a new three-row Jeep SUV to its lineup, The Detroit News has learned.

Fiat Chrysler plans to revive Mack Avenue Engine II, which has been idled since 2012, as an assembly plant building a new three-row Jeep Grand Cherokee for model year 2021. The move could add as many as 400 new auto jobs in the city.

The renovated Mack Avenue facility would be the first new auto assembly line to open in Detroit in 27 years, potentially cushioning the blow of General Motors Co.’s plans to stop production of four sedans at its Detroit-Hamtramck assembly plant by June 1.

When Mack II starts production of the three-row Grand Cherokee, FCA would begin retooling its Jefferson North Assembly Plant—directly across the street from the Mack Avenue Engine Complex—to make way for the next generation of the two- and three-row Grand Cherokee.