Nissan as Chrysler's Savior

Posted by: David Welch on April 15, 2008

When Nissan and Chrysler announced a deal yesterday that they will build more cars for each other, it naturally fueled speculation that some bigger merger or alliance isn’t far off. On paper, a long-term merger or alliance between Renault-Nissan—or an outright buyout—would make sense for Chrysler. Without a big partner like Daimler AG (even though that was a truly bad marriage) Chrysler is missing some huge pieces needed to be a competitive carmaker. That became more apparent yesterday when Chrysler forged a deal with Nissan to get a subcompact car from the company.

Beyond some help in small cars, Chrysler needs the cash and credit rating of a bigger healthier player. Without a big infusion of fresh cash, Chrysler will have a tough time affording the new technology needed to meet both future fuel economy rules and to make efficient vehicles that consumers are demanding as our gasoline prices inch toward the stratospheric pump prices Europeans have endures for years. Already, Chrysler relies on Daimler for clean diesel engines and General Motors for hybrid technology. Even making a new engine is costly. Owner Cerberus stocked Chrysler with a slug of money, but new technology can eat that up quickly, especially when the company’s day-to-day operations are burning cash.

Next, it is becoming tougher and tougher to compete against bigger global players like Toyota, Honda, GM, Volkswagen and Ford, all of whom can spread development costs over big sales volumes across the globe. Chrysler is, by comparison, a small regional carmaker. It doesn’t sell much outside the U.S. and doesn’t have the resources to quickly expand into growth markets. A deeper, more permanent tie-up with Renault-Nissan, or even just Nissan, could go a long way toward solving all of that. Chrysler could piggy back the sales volumes of Renault-Nissan to get lower prices on parts, steel, aluminum, you name it. Nissan also has its own diesel engines and a hybrid system developed in-house that both hit the market around 2010. Chrysler could get a crack at that hardware.

But like the late, great author Kurt Vonnegut wrote, there are “Booby Traps Everywhere.” Renault-Nissan CEO Carlos Ghosn has managed to get a French company to work pretty well with a Japanese company. What happens when you pull a distinctly American culture into the mix? Can they work together? It won’t be easy. The good news is that English is already the business language at Renault-Nissan. But getting two or three big companies to work together will present a whole host of problems.

That said, in the long run it may be Chrysler’s best option. Former Chrysler President Thomas Stallkamp has said several times that Chrysler wasn’t capable of standing alone in 1998 when the deal was done with Daimler. These days, competition is tougher, the U.S. market is more mature and the need for technology is greater. Chrysler is under even more now than it was a decade ago to find a savior.

Reader Comments

Noz

April 15, 2008 1:04 PM

Well, there is always that other, and last, option. A matter of collecting one's marbles, and heading for home, or whatever. Seems to me that the planet has a sufficient number of auto makers, with perhaps one or two more coming that we don't yet know about. GM and Ford can always fade away to allow for them. That process is well down the road already.

America has a long history of failing car companies, just three remain, 1.75 is a better number after making certain realistic 'adjustments'.

American executives do not have much of a record of 'getting along with foreigners', especially when their position is clearly that of an underling, or darned close to it. Our 'best and brightest' don't perform well in this role, Chrysler's 'lesser lights' are faltering rather badly while playing the 'stars'! In short, toss in the towel before it is naught but shreds.

Jonathan

April 15, 2008 4:24 PM

Chrysler unfortunately was stripped of it's technological prowness and inovation while paired with Daimler.
Chrysler needs to get back to it's roots and start developed new niche vehicles like the Caravan, Grand Cherokee, Crysler 300 taht people want to be see in and drive.
Chrysler's quality has been spotty, but the LX series of cars (Charger, Magnum, 300) have been reliable.
I actually own a 2005 Magnum R/T since new and it now has 67,000 miles and it has been one of the best cars I owned, in fact better than any of the 4 Honda products I owned including my 2006 Acura TL.
I stopped buying into the general concensus about Japanese cars a few years ago, the Magnum is proving to me American cars can be reliable.

I think Nissan and Chrysler could be a good match.
Nissan builds good cars (in my opionion there is no better V6 that the VQ) I owned a 1996 Maxima and it was superior to any of my Hondas.
I think this could work.
Chrysler's brand strength in SUVs, CUVs, and trucks could bode well for Nissan.

Squeezebox

April 15, 2008 5:29 PM

Chrysler's best hope for a turnaround was right before they were bought by Daimler-Benz. They had a design studio that was the envy of the world, and it was just starting to produce the head-turning models needed to save the company. As I recall, the PT Cruiser was originally meant to be a limited-run collectible car. It was Daimler's decision to make it a permanent part of the lineup. The PT hasn't had a redesign since it was first introduced. If the dog will invest in a new design staff, they may be able to turn it around. Otherwise, just dress it up and sell it to Tata.

bailout

April 16, 2008 12:47 PM

lets see here lee i occoa more than 20 yrs ago stated chysler is to big to fail and what happened? the taxpayer bailout this junky company and everybady got paid.
now 20 yrs later chrysler has nothing led this dog go under and elemiate any cash payments to all board members.

the public is not here to support a faulty corporation.this is why carl icann is important.

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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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