Wednesday, September 10, 2008

Canadian Chrysler plants could build Nissan minivan

A worker checks minivans at the Chrysler plant in Windsor, Ont.

Dan Janisse/Canwest News ServiceA worker checks minivans at the Chrysler plant in Windsor, Ont.

WINDSOR, Ont. -- The assembly partnerships announced recently by Chrysler and Nissan could soon widen to include a Canadian-built Nissan minivan assembled in Windsor, industry analysts said on Tuesday.

Chrysler LLC recently agreed to build the 2011 Titan pickup truck for Nissan in Mexico, and Nissan has agreed to build the Dodge Hornet subcompact car for Chrysler. More deals are said to be in the works as the two companies increasingly share assembly duties, with Nissan building the cars and Chrysler the trucks.

The next deal in the expanding partnership will almost certainly involve Chrysler building the 2010 Nissan Quest or its replacement at its Windsor Assembly Plant, said John Wolkonowicz, senior automotive analyst for Global Insight in Lexington, Mass.

"I've been forecasting that ... and I've been hearing more rumblings," Mr. Wolkonowicz said. "I think it's highly likely that Chrysler will be building a minivan for Nissan, which has had a very unsuccessful run with the Quest."

The 4,600 members of CAW Local 444 at the Windsor plant have been worried they could lose the third shift if minivan sales continue to decline. Mr. Wolkonowicz said if the Nissan minivan is built there, "it would allow a plant like Windsor to thrive - and that's a good thing."

Nissan has already announced it will stop building the Quest in Canton, Miss., in 2009. The company has said it planned to have the next-generation van assembled in a new plant being built in Fukuoka, Japan, by Issan Shatai Co., its Japanese assembly affiliate. But shipping costs were believed to be a concern.

Not only would it make better economic sense for both companies for Chrysler to build Nissan's minivan in North America, Mr. Wolkonowicz said, the American company builds a far superior product, which would aid Nissan.

"The Quest has been a failure" for Nissan, Mr. Wolkonowicz said, while Chrysler's minivans have been a "spectacular" success, setting the bar for the entire industry segment. That is why Volkswagen arranged to have Chrysler assembling its 2009 Routan minivan in Windsor, on the same RT platform used for the Dodge Grand Caravan and Chrysler Town and Country.

Erich Merkle, an auto industry analyst with Crowe Horwath LLP consulting, said he hadn't heard Chrysler and Nissan had a minivan deal yet. But such an arrangement "makes sense" based on the other collaboration deals the companies have already done.

"Why spend all that money for a complete redesign of the Titan and Quest? For what? You certainly can't justify the cost of all the tooling and development," Mr. Merkle said from Grand Rapids, Mich. "Besides, the current Nissan Quest is just doing awful. They couldn't do worse than that."

Nissan has been selling about 1,800 minivans per month in North America, out of a total market segment that has shrunk to about 800,000 units per year from over one million units per year three years ago.

Sources who work at Windsor Assembly and elsewhere in the Windsor-Detroit auto industry said the Chrysler-Nissan minivan deal has been in the works for months and might be announced within the next few weeks.

Mary Gauthier, spokeswoman for Chrysler Canada, said the company "does not discuss future product plans." Ken Lewenza, the newsly elected president of the CAW who represented the union at Chrysler's Windsor Assembly Plant until last week, could not be reached for comment on the prediction.

"I don't think Chrysler is ready to anounce this strategy yet," Mr. Wolkonowicz said. "It's not to their benefit to do so until its all put together."

Mr. Merkle said the partnership between the two was evolving quickly and rapidly, with Nissan offering to do what it does best for Chrysler - building cars - and Chrysler pledging to do the same in trucks for Nissan. "They complement each other really well and you're going to see much more between the two of them."

Mr. Wolkonowicz said the motivation for the collaboration runs deeper than just the two companies saving development cash and filling out gaps in each other's portfolios: It's about Chrysler prepping itself for eventual sale.

"Make no mistake: Cerberus [Capital Management] didn't buy Chrysler to stay in the car business. They bought it to fix it up and sell it and make a lot of money," he said.

A minivan partnership "makes sense. It sets Chrysler up for a sale to a third world company. It increases their plant efficiency and helps them make a lot of money to make them attractive for sale. And it makes Chrysler competitive in segments they haven't been very competitive in."

If, for instance, "a company from India bought Chrysler, this would allow that company time to develop its own small cars for sale in North America. In the meantime they would still have a full portfolio of vehicles."

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