Nissan and Chrysler to join forces
Date: Tuesday, December 18 @ 14:09:10 CST
Topic: OEM News
Dec. 14 (Bloomberg) -- Nissan Motor Co. and Chrysler LLC, the third-largest Japanese and U.S. automakers, may share technology to develop new cars and trucks, according to people with knowledge of the companies' discussions.
By Mike Ramsey and Bill Koenig
The talks focus on pickups, small cars and engines, said the people, who don't want to be named because the negotiations are private. Nissan wants to tap Chrysler's expertise with large trucks, while Chrysler, acquired five months ago by buyout firm Cerberus Capital Management LP, seeks access to Nissan's small cars.
A deal may help both companies save money as Chrysler battles two years of losses and Nissan confronts a 16 percent decline in its stock price this year. It would add to a growing list of partnerships aimed at expanding product lineups and keeping assembly plants running with minimal investment.
``Collaborating is going to be a way of life,'' said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan. ``Costs are high. You have GM and Toyota with global economies of scales. That ramps up the pressure dramatically.''
Nissan said this week it will build small pickups for Suzuki Motor Corp. in the U.S. next year, while Chrysler plans to assemble minivans for Volkswagen AG in Ontario.
Nissan and Chrysler aren't considering buying equity stakes in each other, the people said. Nissan spokesman Simon Sproule in Tokyo and Chrysler spokeswoman Lori McTavish in Auburn Hills, Michigan, declined to comment.
Chrysler Chief Executive Officer Robert Nardelli told employees this month that the company's losses may rise to $1.6 billion this year, people with direct knowledge of his statements said last week.
Chrysler had a 2006 loss of $680 million using international accounting standards, or $1.5 billion using traditional U.S. accounting rules.
Nissan, under CEO Carlos Ghosn, boosted operating profit the most in at least three years in its latest quarter, to 218.7 billion yen ($1.9 billion). It was helped by increased sales in Russia, China and the Middle East.
Nissan fell 0.9 percent to 1,192 yen as of the 11 a.m. trading break on the Tokyo Stock Exchange.
Ghosn said as recently as October that he still wants a U.S. partner, after General Motors Corp. rejected an alliance 14 months ago. GM spurned the idea after three months of study with Nissan and Renault SA, the French automaker that owns 44 percent of Nissan and is also led by Ghosn.
That proposal focused on the savings each company could achieve by combining operations in areas such as purchasing.
The former DaimlerChrysler AG sold 80.1 percent of Chrysler to Cerberus in August to the New York private-equity firm after nine years of ownership.
Chrysler now seeks to expand outside North America, where it gets about 90 percent of its sales.
Chrysler wants to cut that dependence so that it gets 50 percent of its revenue from overseas, President Jim Press, the former chief of Toyota Motor Corp. in North America, said two months ago. The Nissan-Chrysler talks include the possibility of Nissan building vehicles for Chrysler outside North America, one person said.
Nissan introduced its biggest pickup, the Titan, four years ago. It's the only U.S. full-sized pickup with fewer than 100,000 sales a year and captures about one third the volume of its next-biggest rival, Toyota's Tundra.
Dodge's Ram ranks third in sales, behind Ford Motor Co.'s F-Series and GM's Chevrolet Silverado. Chrysler will begin selling a redesigned Ram in next year's second-half. Full-size pickups account for more sales in the U.S. than any other vehicle category and are among the most profitable.
Late next year, Nissan plans to build versions of its Frontier compact pickup in Tennessee for Suzuki, while its smaller Japanese rival will provide minicars and other small autos to Nissan in Europe and Japan.
The agreement will allow Nissan to boost production at its main North American plant and let Suzuki introduce a pickup truck in the U.S. without developing one on its own.
Chrysler's agreement to build minivans for Volkswagen, Europe's biggest automaker, will allow Chrysler to operate its Ontario plant at fuller capacity. The vans will be based on Dodge Caravan/Chrysler Town & Country models and incorporate a Volkswagen-designed front, rear and interior.
Chrysler has relied on light trucks, including pickups and sport-utility vehicles, for the bulk of its profits since the 1990s. Sales of such models have fallen since 2005 because of rising gasoline prices.
To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6bloomberg.net; Bill Koenig in Southfield, Michigan, at email@example.com