Chrysler meets with Hyundai and Mitsubishi

August 10, 2007 |BY TIM HIGGINS
FREE PRESS BUSINESS WRITER

TRAVERSE CITY -- Chrysler LLC, newly independent from DaimlerChrysler AG, is in talks with Mitsubishi Motors Corp. and Hyundai Motor Co. about possible new partnerships as the Auburn Hills car company looks to better compete outside of North America, a senior Chrysler executive said Thursday.

Frank Klegon, Chrysler executive vice president of product development, said possible partnerships could include Hyundai-made engines going into Chrysler vehicles in China and Chrysler-made engines going into Hyundai vehicles in the United States.

"Those are the kind of things we are talking about at this point," he said, stressing that no agreement has been reached.

The talks come as Chrysler is scrambling to make itself a larger player on the global field. A controlling stake in the Auburn Hills automaker was acquired by private-equity firm Cerberus Capital Management last week after nine years under the Germany-based DaimlerChrysler.

"There is no commitment at this point. I think they are both interesting companies, certainly Hyundai, and we'll see if we can generate some future opportunities," Klegon said during a forum at the Center for Automotive Research's annual Management Briefing Seminars.

Bob Nardelli, Chrysler's new CEO, said earlier this week that he intends to make Chrysler a globally competitive automaker and supports Chrysler President Tom LaSorda's plan to return the company to profitability by next year, which includes developing new global partnerships. Chrysler wants to double its sales outside North America in the next five years.

Last month, Chrysler received permission from the Chinese government to partner with Chinese automaker Chery Automobile Co. Chery-made small cars will be sold in North America under a Chrysler nameplate. This allows Chrysler to get into the small-car market without the expense of developing such a vehicle.

"We're going to help them do some product development," Klegon said. "We'll do some engineering. Our challenge with that will be to do some engineering but not losing our intellectual properties as we go through that process."

Chrysler has had relationships with both Mitsubishi, in which the old Chrysler Corp. had an equity stake, and Hyundai, in which DaimlerChrysler once held a stake.

Chrysler already is partnered with Hyundai and Mitsubishi in a five-factory venture called the Global Engine Manufacturing Alliance, which includes a state-of-the-art plant in Dundee.

"We're looking at what are the next steps," Klegon said. "You look at opportunities when you're going to produce vehicles in different places in the world: Does it make sense to produce parts for each other?"

He suggested that the relationship with Hyundai did not work out in the past because of the Daimler side of the business. "I think that was part of some of our internal conflicts as DaimlerChrysler organization and maybe as the Chrysler Group we can rekindle some of those things," Klegon said.

As Chrysler puts more focus on its global business, Klegon said Chrysler is busy opening new product development offices in China and eastern Europe that will help guide the automaker in its efforts to grow its international sales. He also has plans to expand the product development office in Mexico.

"We look to have three development centers that will look from a global perspective for those opportunities for lower cost sourcing," Klegon said.
In India, he noted, he already has 150 engineers working primarily on product development. He is close to having an eastern Europe office, likely in Warsaw, Poland, to handle procurement and engineering "so we can take advantage, again, of low-cost sourcing opportunities."

Klegon said the next step is to work with partners to develop vehicles that could be produced in those areas of the world and shipped elsewhere.