Nissan, Chrysler agree to share products

Companies downplay talk of alliance, but analysts say it's possible
BY TIM HIGGINS and BRENT SNAVELY • FREE PRESS BUSINESS WRITERS • April 15, 2008


Chrysler LLC and Nissan Motor Co. announced a blockbuster partnership Monday to assemble cars and pickups for each other in a deal that draws on each automaker's expertise and perhaps sets up the companies for a much deeper relationship down the road.

Nissan will build small cars for Chrysler to sell and Chrysler will make pickups for Nissan under a deal announced by both companies late Monday afternoon.

Analysts saw the moves as a potential big step toward adding Chrysler to the Renault-Nissan alliance, but the companies downplayed that scenario. Carlos Ghosn, the chief executive of both Renault and Nissan, has long said he wants a North American partner.

Two years ago, he came up short in a bid to merge with General Motors Corp.

"This is definitely deepening the relationship considerably, which I think is good for both parties," said Erich Merkle, director of forecasting for Grand Rapids-based consulting firm IRN Inc. "Chrysler needs a small car. In terms of the time and resources it would take to develop a legitimate small car offering, Chrysler doesn't have it."

Financial terms of the deal were not disclosed. Executives from both companies worked to downplay speculation that Monday's deal was anything more than a simple transaction to make cars and trucks for each other.

Dominique Thormann, senior vice president of administration and finance for Nissan North America Inc., said the companies plan to "keep an open mind and open dialogue for further product-sharing opportunities," emphasizing that he was referring not to financial or ownership-related deals, but only to product and production-related deals. Nissan refers to such arrangements as original equipment manufacturer or OEM deals.

"Once again, this is an OEM discussion and we don't have a business discussion ongoing currently," Thormann said. "There is no business discussion right now."

Tom LaSorda, a Chrysler president and vice chairman, echoed those words. "These are both just product deals," he said.

This is hardly a first date for Chrysler and Nissan.

In January, Nissan and Chrysler agreed to a deal in which Nissan will build a small car based on the Nissan Versa for Chrysler to sell under one of its brands in Brazil in 2009.

Nissan affiliate JATCO also has been supplying transmissions to Chrysler since 2004.

Under the new deal, Nissan will use its Oppama Plant in Japan to build a Chrysler-designed small car for the Auburn Hills automaker to sell in North America, Europe and elsewhere beginning in 2010.

Chrysler plans to use its Saltillo, Mexico, plant to assemble a Nissan-designed pickup for the Japanese automaker to sell in North America starting in 2011.

Both the pickup and the small car will be sold in the United States, said Frederique Le Greves, vice president of communications for Nissan North America Inc.

Neither company provided model names or volume targets.

The new Nissan pickup will be based on the Dodge Ram but tailored to the Japanese company's designs and the new Chrysler small car will be based on a Nissan platform with design out of Auburn Hills, LaSorda said. He added that the Chrysler small car will be based on a new platform but declined to name it.

"Nissan, their forte is small cars and they do them very well. They can do it quickly with very little investment," Merkle said. "Chrysler can help Nissan with one of its shortcomings, which is the Titan pickup."

To UAW members, the deal means Chrysler's U.S. pickup plants in Warren and near St. Louis could see more work as the automaker plans to shift production currently done at Saltillo to make room for the Nissan truck.

Jason Craig, who works at a Chrysler parts warehouse in Center Line, said the announcements were shocking and frustrating, especially because the new vehicles, to be sold in the United States, are to be built in Japan and Mexico.

"Don't try to pass it off as something that's American, if it's not," said Craig, 34, of New Baltimore.

Chrysler, with its truck-heavy lineup, has struggled in recent years as the price of gasoline has soared and consumers have turned to smaller cars.

Chrysler has been looking for partners ever since Cerberus Capital Management bought a controlling stake last August from DaimlerChrysler AG, leaving the newly private U.S. automaker without global reach. Chrysler lost $2.9 billion on operations and restructuring costs last year, internal numbers seem to indicate.

"Forging the right tactical partnerships is critical to the long-term success of Chrysler," LaSorda said.

Chrysler also has a deal with Chery Automobile Co. to sell Chinese-made small cars under a Chrysler brand name but those vehicles are not ready for North America.

"At some point we believe we need more than one small car for NAFTA," LaSorda said. "So, yes, we would be counting on Chery to help us with that."

Nissan's current pickup -- Titan -- is made in Canton, Miss. The current generation of the Titan -- Nissan sold 66,000 of them in the United States last year -- is expected to end in 2010.

The Canton plant also makes Nissan's Altima and Armada. Nissan announced last week its plans to make a line of three business trucks in Canton for sale beginning in 2010.

Along with helping each company fill its lineups, the deal also helps them improve their global scale, said David Cole, chairman of the Center for Automotive Research in Ann Arbor. He and other experts said it could lead to a bigger partnership in the future.

"With a second date ... it tells you two things are going on here: One, the people in New York are talking about the business side of things. And also the technical, engineering/manufacturing people are talking about working together. And those are two ingredients that have to occur for this to result in a more comprehensive marriage," Cole said.
-FREE PRESS