Tuesday, April 22, 2008

Chrysler-Nissan: Loads of partnership potential

Chrysler will build a Nissan pickup, which will kill the Nissan Titan, shown.

Chrysler and Nissan have barely scratched the surface when it comes to sharing products and powertrains — a sign that their new tactical alliance could grow into a major strategic partnership.

With two product-sharing agreements already in the works, the automakers now say they're busy exploring more ways to cooperate. They won't have to look far. Each offers the other quick fixes in key areas.

Nissan has a lot of what Chrysler lacks: global reach, excellent small- and mid-sized car platforms and small diesel engines for cars. Chrysler could chip in hybrids, Hemis, big diesel engines from Cummins, pickups, SUVs, minivans and Jeeps.

"Chrysler-Nissan-Renault is a marriage made in heaven," says John Wolkonowicz, an analyst for Global Insight in Lexington, Mass.

Speculation about Chrysler-Nissan nuptials sounds practical, even probable, if you count the many ways the two companies could help each other.

"They're getting to know one another so they can make a better judgment on how this is going to unfold," says Dave Cole of the Center for Automotive Research in Ann Arbor, Mich.

Chrysler CEO Bob Nardelli left open the possibility that Chrysler could call on Nissan or other partners to speed up the process of filling niches in its lineup.

"The issue is not that we can't do it," he said. "It's whether we can do it faster. We will see if we can fill some of those voids faster than we could do it ourselves."

Chrysler co-President Tom LaSorda said the Nissan links don't affect Chrysler's cooperation with Chery Automobile Co., the Chinese carmaker.

"At some point we believe we need more than one small car" for North America, LaSorda said. "We would be counting on Chery to provide that."

Chrysler executives call the Nissan cooperation a tactical move. Nardelli says talks about a strategic long-term partnership would be handled by Cerberus Capital Management LP, which owns 80.1 percent of Chrysler. So far, they say, that's not happening.

Wheels are turning

Still, other things are happening fast. In January, the two companies announced that Nissan will build a Versa-based subcompact for Chrysler to sell in Latin America. It will probably be a Dodge.

Last week they expanded the cooperation in two areas. Chrysler will make a full-sized pickup in Saltillo, Mexico, for Nissan in 2011 as a 2012 model, meaning Nissan will stop making the Titan. Also, Nissan will build a Chrysler-designed car at its factory in Oppama, Japan, starting next year for the 2010 model year. Chrysler will sell that car in North America, Europe and other global markets.

What next? Well, closer cooperation could help fill big holes in both companies' powertrain offerings.

Nissan does not have a diesel engine for its big Armada and Infiniti QX56 SUVs. Chrysler has one, and two more are on the way. All three engines are sourced from Cummins. The current diesel in the Dodge Ram pickup truck is an older, but bulletproof, inline six-cylinder. But two new clean-running diesels, a 4.2-liter V-6 and 5.2-liter V-8, are due around 2010.

The Cummins name on a fender gives any light truck instant credibility with consumers who tow boats, trailers and other heavy loads.

Nissan can use its link with Renault to supply diesel engines for Chrysler's cars and crossovers.

Help with hybrids

Hybrids are another area where the companies need each other. Nissan is licensing a Toyota system for the Altima hybrid that is available in only eight states. Nissan was late in developing its hybrids. Chrysler could help fix that.

Chrysler, when part of DaimlerChrysler, helped develop two sophisticated Two Mode hybrid transmissions. One is a rear-wheel-drive transmission designed for big pickups and SUVs; the other is a front-wheel-drive unit designed for small and mid-sized cars and small crossovers. But, alone, Chrysler likely wouldn't be able to achieve the economies of scale to make money with its hybrids.

Outfitting some Nissan vehicles with the Two Mode system could enable Chrysler to boost volume enough to lower the cost of battery packs, controllers and other proprietary items.

Here's a segment-by-segment rundown of how the two companies fit together.

-- Mid-sized cars: The Chrysler Avenger and Dodge Sebring, introduced in 2007, have fared poorly. Chrysler has begun working on an urgent program, called Project D, to replace them as quickly as possible.

The program suffered a setback when its leader, Mike Donoughe, resigned in March. According to published reports, Donoughe resigned after a dispute with senior managers. The company said there was no dispute.

"Nissan has some great car platforms, which are really Renault platforms — the Versa, the Sentra, the Altima and the new '09 Maxima," says Global Insight's Wolkonowicz.

In 2007, the Nissan Altima outsold the Avenger and Sebring by 284,762 to 176,934. The Altima is perennially listed among the leaders in Consumer Reports' recommended family sedans. Chrysler could dump its mid-sized replacement program and put its own sheet metal on a version of the Altima. But Chrysler has made Project D a central component of its plan to re-establish engineering prowess after its nine-year merger with Daimler.

-- Compact cars: The Nissan Sentra, also highly rated by Consumer Reports, sold in roughly the same number as the Dodge Caliber in 2007.

-- Large rear-drive sedans: Nissan doesn't sell one. Chrysler has two: the Chrysler 300 and Dodge Charger. The Dodge Challenger Hemi-powered muscle car, built on the same LX platform, arrives next month in dealerships.

-- Minivans: Chrysler is still the king and the only company with two entries: the Chrysler Town & Country and Dodge Grand Caravan. The Nissan Quest is an also-ran. With the segment shrinking, Nissan would have to think long and hard about anteing up for a new Quest.

-- Crossovers: Since it dumped the slow-selling Pacifica late last year, Chrysler has been virtually a nonplayer in the industry's hottest segment. Nissan was one of the earliest and most successful players in crossovers with the Murano. The recently introduced Nissan Rogue competes with the Jeep Patriot and Compass.

The Oppama plant, where the Chrysler small car will be made, also is where Nissan makes the Cube, a Scion xB-style small wagon.

-- SUVs: Both companies have broad selections. Jeep alone has seven models. After scrapping the Titan, the Titan-based Armada may not be far behind.

The Chrysler Aspen and Dodge Durango will be available this fall with Two Mode hybrid powertrains. But Chrysler has said it will close the Newark, Del., factory where those vehicles are made in 2009.

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