Posted by: David Kiley on August 7, 2008
The Wall Street Journal today published a story stating, according to un-named sources, that Chrysler is in talks with Japanese automaker Nissan to essentially supply the Auburn Hills, MI carmaker with mid-sized cars derived from the Nissan Altima.
Such a deal would come on the heels of an agreement for Nissan to supply Chrysler with a version of the Nissan Versa as its next small car. In turn, Nissan is getting out of the business of building its own full-sized pickups and is going to replace the Titan (currently with $10,000 of incentives on it) with a version of the Dodge Ram.
As Chrysler strikes more deals like this to have other parties make its cars (it also has a deal for Chinese automaker Chery to build a small car, but the state of that deal seems in question), one wonders what the company is turning into. The WSJ compared the emerging model at Chrysler with that of computer-maker Dell, which is more of a computer assembler of supplier parts and modules than an innovator in its own right. I might draw a different comparison. Chrysler is shaping up to look more like a Chinese state-owned automaker that relies on joint ventures with other automakers for new models rather than a company that will innovate on its own.
That may be too harsh. After all, Chrysler figures to remain in the minivan business, which it has led, as well as the pickup truck business where it has had a niche. And it will continue to build SUVs, especially for the Jeep brand, which remains the company’s most valuable brand asset. Minivans and pickups don’t exactly look like a growth industry right now, but they are two vehicles that Chrysler knows how to do much better than Nissan.
But Chrysler’s brands are nowhere when it comes to passenger cars. Dodge cars attract a very low quality credit-score buyer, and have very low trust, according to stats I have seen from Strategic Vision in the last couple of years. Chrysler brand is not much better. The newest models—Avenger and Sebring (pictured above)—score in the cellar on J.D. Power’s quality and APEAL rankings. The PT Cruiser has seen its day. And even the once hot Chrysler 300 seems to have lost its freshness. Even when the 300 was hot, it did nothing to move the numbers in terms of what people thought of the Chrysler brand. It was as if the buyers were looking past the Chrysler brand and just focusing on the 300 badge and styling.
Even the current Sebring and Avenger, which would be replaced by the Altima derived cars if a deal is cut, were developed along with Mitsubishi. That program, in which Chrysler had a lot to say about the outcome on styling and engineering, has yielded a terrible outcome. Its development was undercut along the way by difficult working relations between the two companies. When companies and staffs are not financially and emotionally fully invested in the success of vehicles, expect trouble.
I am at a loss about why a discerning customer would opt to buy a Nissan Versa or Altima derivative from a Chrysler or Dodge dealer. For Chrysler, it would seem to be a strategy just to keep the lights on for dealers and those who remain strangely fixated on buying Chryslers and Dodges even when they are Nissans. Too, the profits of such vehicles for the automaker are very small when you outsource a car. That means those cars get very little marketing support. Look at GM and the very little attention it pays to Pontiac Vibe, which is built in the company’s joint-venture plant (managed along with Toyota), and is mechanically the same as a Toyota Matrix and Corolla. GM makes very little on those cars, but they are important to GMC/Pontiac dealer sales volume especially when SUV sales have gone South.
There are lots of joint ventures in the industry today. But outsourcing car production and engineering to Nissan—if this second deal goes through—looks like a strategy for treading water until the company is sold, stripped or more fully integrated into Nissan. It doesn’t look like a play to make Chrysler independent and vibrant.