Chrysler and Renault-Nissan at the Dance

Posted by: David Welch on December 17, 2007

It leaked out in the past week that Chrysler is talking to Renault-Nissan about striking up a deal to jointly develop some key models that the struggling American carmaker needs. Could this be the prelude to a marriage? On paper, anyway, the two companies are great dance partners. Nissan’s foray into the U.S. pickup, minivan and suv markets has largely failed. But Chrysler is at least good at making pickups and minivans. Meanwhile, Chrysler’s new compacts and passenger cars are, at best, also-rans on a hotly-competitive business. Nissan has competitive cars. Renault-Nissan boss Carlos Ghosn has coveted a North American partner to his alliance. In a few years, Chrysler owner Cerberus Capital Management will be looking to flip this business. Something tells me Ghosn will be more eager to buy than Wall Street.

But let’s not plan nuptials before the two have gone on a date. We all know arranged marriages don’t work. Chrysler and Renault-Nissan could try some joint ventures to see how well the three companies can work together. While Renault and Nissan have shared plenty of hardware for new models, it has taken about eight years to get a lot of it done. It’s not easy. Throw a third company into the mix and things could get very complicated. Plus, Chrysler and Nissan have both struggled to get their quality up, at least in North America.
A trial joint venture tested over a few years and a couple of models could dictate volumes about whether something longer term is worth doing.

Even if it never comes to some larger joint ownership, Chrysler needs partners to survive. Quite simply, Chrysler is a regional car company that gets most of its business from North America. It doesn’t generate the sale volume from most of its individual models to get the low costs of big global players like, say, General Motors or Toyota. Those companies can develop the guts and underpinnings for one small car and spread the costs over a million copies sold in Europe, Asia and North America. Without a partner, Chrysler is at a big disadvantage. To that end, Chrysler has literally looked at every company in the business, says company Vice Chairman and President Tom LaSorda. So there are other opportunities. But Ghosn will be looking for another alliance partner. And one day Cerberus will be looking for a buyer. Watch this one closely.

Reader Comments

Old Dominion Guy

December 19, 2007 1:08 PM

This is a compelling thought - but I think another large merger like this will be avoided given the potential pitfalls are greater than the upside. The failed Daimler Chrysler merger is evidence of that.

Chrysler has many strengths and could grow on its own. Its not dead yet.

Gary

December 24, 2007 7:03 AM

Wouldn't a cooperation with GM work better ? They build vehicles in similar categories and produce in the same towns..parts could be shared and the cost dropped. But what Chrysler really nees to do is come up with good looking cars like the 300C..not some wacky Sebring.

Gary

December 24, 2007 7:05 AM

Wouldn't a cooperation with GM work better ? They build vehicles in similar categories and produce in the same towns..parts could be shared and the cost dropped. But what Chrysler really nees to do is come up with good looking cars like the 300C..not some wacky Sebring.

Jon Shein

January 13, 2008 1:04 AM

A cooperation with GM will be a disaster! Look the way American car companies are!! Forget it....the good times are over people don.t want American junk anymore!! Renault-Nissan and Chrysler will do fine!! You guys still dreaming?

I love Nissan

April 14, 2008 9:53 PM

I think Crysler could benefit a lot from Nissan. Cost sharing of parts like GM does is the ultimate goal in creating profitability--the more widgets you make and put in the most cars creates the best result on economy of scale purchasing type and reduces the costs. It also creates more power with the suppliers to beat them into un-profitability. Nissan has great engineering, the most efficient manufacturing in the world, and is highly profitable for an industry age company. All companies would need to have patience and a willingness to work together without fear (Nissan and Renault do it in a great way already--adding a third would just be another challenge that could be overcome)

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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