Chrysler and Nissan: Sharing Can be Fun
Chrysler LLC has not been shy about going after a partner. Chrysler needs access to the expertise in small cars that they don’t have, as well as to benefit from the kinds of economies of scale necessary to make any sort of profit on vehicles expected to sell at the bottom end of the scale. After signing with Chinese maker Chery for help in the international arena, announcements have come on new relationships with Nissan. The OEM agreements with Nissan announced this week are examples of two companies finding a win-win relationship.
Nissan and Chrysler Serve as OEM Supplier and Client
Often deals like this are announced with one partner clearly benefiting more than the other, no matter how many times the phrase “win-win” is used during the presentation. But in this case, the relationship will benefit both partners. Each company is contributing in areas where they have expertise and market success, areas where solo development costs are prohibitive. Each company is also using production capacity that might otherwise be difficult to fill.
Chrysler LLC will build the next-generation Nissan Titan in Saltillo, Mexico, though not until 2011CY. The truck will be based on Dodge’s latest Ram. Nissan will get a true truck contender with much less investment. Company executives cited the cost of meeting upcoming CAFÉ regulations as one of the reasons for opting out of building full-size trucks. They say the Armada will continue, still built in Canton. Building the Nissan version in Mexico also means shifting some Dodge Ram production back to the States, to Warren and St Louis North specifically, which helps repair the relationship and shows some loyalty to their UAW employees.
Nissan will build a compact car at their Oppama, Japan, plant for Chrysler to sell in Europe, South America, and North America. The Oppama plant builds vehicles on the Versa platform. This gets Chrysler into a small-car segment faster and with a reliable product. Though on the announcement conference call, Chrysler LLC co-President Tom LaSorda says initial styling is done on the Chrysler Nissan, the official company line is that they haven’t decided which brand will get the car.
Both companies are styling their own products, with input into suspension and tuning for their respective vehicles. Powertrains, at this early stage, are not yet being reported, though it seems logical for Chrysler to use the Nissan powerplants and vice versa.
The obvious question for most is whether Chrysler LLC and Renault-Nissan will enter into a more formal relationship. The possibility of Renault-Nissan buying Chrysler LLC (the other way around Cerberus may not be able to afford and would not likely want) is expected speculation, but a formal setup isn’t necessary for the two companies to profit from their relationships. Renault’s Carlos Ghosn once upon a time focused on looking for a permanent tie-up in the States. After a long courting dance with General Motors failed, Ghosn seems to have lost his appetite for a full merger. Or if he hasn’t lost his appetite, he’s apparently learned to be more discreet in his approach.
Either way, Nissan has long known that selective partnering and OEM agreements can help fill holes in a product range as well as fill production capacity, and that those partnerships can be with several competitors. Mergers and acquisitions were all the rage for a time; as many unravel, this approach of specific partnerships where each has a clear benefit could be a more sound strategy. Perhaps also a little bruised from the divorce from Daimler, Chrysler LLC is learning to make deals where they make sense. The feeling that Cerberus is looking to part out Chrysler LLC won’t die for some, but agreements like this one indicate Chrysler LLC management, at least, is in it for the long haul and looking for ways to ensure the company survives as a whole.