Chrysler, Nissan: Could More Product Swaps Be in Store?
April 15, 2008

By Michelle Krebs

When Chrysler and Nissan announced their latest model-sharing plans Monday, company executives hinted they were leaving open the door for further product discussions. The initial opening that led to the Chrysler-Nissan small-car-for-big-truck swap had been cracked in January when the two companies announced Nissan would supply Chrysler with a version of the Nissan Versa to sell in South America.

"We agreed to an open dialogue [in January] to continue to explore future product development and sharing opportunities," Dominique Thormann, Nissan's North American senior vice president for administration and finance, said in a conference call Monday. "And today is one milestone and a culmination of that intention."

One milestone? Could there be others? What could be next?

More Win-Wins?

On Monday, the two companies emphasized their newly announced product exchange is a win-win. It extends the product range for both companies, giving Chrysler a small car from Nissan and Nissan a large truck from Chrysler. It also makes efficient use of global manufacturing capacity, something both companies have too much of in North America. It also helps each lower product development costs, skyrocketing due to stricter upcoming regulations on fuel economy, emissions and safety.

Chrysler, of which 80 percent was purchased by private equity firm Cerberus Capital Management, is in dire need of a quick turnaround for whatever end game Cerberus has in mind for the automaker. In the meantime, Cerberus has been burning through cash to keep Chrysler afloat. Only last Wednesday, Goldman Sachs placed $500 million of Cerberus' debt, which it incurred for buying 80 percent of Chrysler from Daimler last summer, at a deeply discounted, sources told Marketwatch.

Clearly, the sooner the end game for Cerberus the better. However, while Chrysler has been slashing costs and killing models, it has done little in the way of restocking the barren product cupboard. Company insiders, in fact, tell AutoObserver Chrysler’s future product plan is in shambles -- a product cupboard that is shockingly bare -- with little set in concrete beyond 2010.

Nissan, meantime, has extremely lofty sales and profit margin goals to meet, set by Nissan-Renault CEO Carlos Ghosn.

So if a hook-up in small cars and big trucks is win-win, can't other product swaps be win-win as well? The risk is that, if it is not done cleverly, it will be perceived merely as badge engineering. Still, here are some possible match-ups.

Minivans: Nissan announced last week that it was converting its underutilized Canton, Mississippi, plant, which makes the Titan as well as other models including the Nissan Quest minivan, into a commercial vehicle plant for three yet-unnamed models.

The move displaces the Nissan Quest, and company executives are vague about its future, last week saying only it would find a new home. Perhaps Chrysler could supply Nissan with a minivan much as it is doing for Volkswagen with the upcoming Routan. After all, Nissan's Quest has been perceived as just too quirky to gain any traction while Chrysler's mainstream minivans top the volume charts.

SUVs: The market for large and midsize SUVs has nosedived as gas prices have skyrocketed. Seems hardly worth it for a single automaker to develop a line of SUVs on its own for a shrinking market.

In that regard, Chrysler already has announced it will close its Newark, Delaware, plant that assembles the Dodge Durango and Chrysler Aspen large SUVs. It’s been unclear what Chrysler plans to do to fill that void, if anything. What’s particularly baffling is that Chrysler plans to introduce its first Two-Mode hybrid technology, developed in a unique cooperative with General Motors and BMW, on the Durango and Aspen. The Two-Modes were to have been introduced in early 2008; they now have been pushed back to later in the year.

Meantime, the Nissan Armada and Infiniti QX56 use the same basic platform as the Titan but also the Pathfinder, Frontier and Xterra. Nissan sources in Japan tell AutoObserver that the next-generation versions of the Armada and QX56 are already in the works. However, they have no future manufacturing home. Currently produced at Nissan’s Canton, Mississippi, plant, the Armada and QX56, like the Quest, will be displaced by Nissan’s upcoming commercial vehicles going into the plant. Nissan executives last week, in Detroit to announce their commercial vehicle plans, were rather cagey, saying the vehicles would have a home and would be in the portfolio in the future. Could it be that they’ll find shelter in a Chrysler plant? Could it be they could be shared by Chrysler?

Hybrids: And speaking of hybrids, neither company has much in the way of the expensive technology. Nissan sells only the Altima hybrid and at that only in a limited number of states. Another hybrid reportedly is in the works for around 2010 on the Infiniti Q45 (Nissan Cima in Japan) and possible the Infiniti M.

Chrysler currently has absolutely no hybrids in its line until the Two-Mode SUVs come on stream. The Two-Mode hybrid is to debut on the Durango and Aspen but be offered on the next-generation Ram pickup, which Nissan is getting a version of, around 2010. Executives for the two companies would not say Monday if Nissan will get a hybrid version of the Ram.

Midsize cars: Midsize cars perhaps is where Nissan and Chrysler could find the greatest synergy. Nissan has been a phenomenal success in midsize cars with the Altima; Chrysler has been a dismal failure.

Nissan’s Altima has been a blockbuster sales hit. It was the Altima that helped Nissan North America close 2007 with sales nearly 5% ahead of 2006, bucking the industry's trend for lower sales, according to Edmunds.com's analysis. In fact, Nissan enjoyed the highest percentage sales increase of the Big 6 automakers in the U.S. market with Altima leading the charge with sales up 22% for 2007. Nissan sold more than twice as many Altimas as the entire Infiniti division sold total vehicles, and the Altima outsold all  other Nissan cars combined. It was Altima that helped move Nissan North America closer to the 1-million mark for annual sales, and closer to American Honda in total sales.

Needless to say, the Altima also outsells both of Chrysler's midsize offerings combined, the recently introduced Dodge Avenger (it replaced the Stratus) and the Chrysler Sebring.

In addition, Altima has achieved quality levels Chrysler can only dream of in midsize cars. In January, Consumer Reports magazine ranked the Altima first among mid-priced sedans, eking a slight lead over the venerable Honda Accord and surpassing the Toyota Camry and Volkswagen Passat.

The same issue of Consumer Reports ranked the Dodge Avenger at the bottom of the mid-priced sedan class. Reiterating what many auto critics have been saying, the magazine said the Avenger "feels cheap and underdeveloped,” with “a stiff ride, suspension noise, lack of agility, tight quarters, uncomfortable seats, and substandard interior fit and finish.”

Chrysler had reportedly been fast-tracking a makeover on the Avenger and Sebring.

Could it be, instead, that there’s a cooperative cooking between Chrysler and Nissan in the midsize car category?

Fanning that flame is the recent abrupt departure of Chrysler engineering star Mike Donoughe. Donoughe, vice president and chief engineer for Chrysler’s future midsize product team, was heading a program to develop a segment-leapfrogging compact car, known internally as Project D. However, he abruptly left the company. It was rumored he had a dispute with Chrysler’s new management.

Another interesting twist is the fact that both Nissan and Chrysler have had their share of quality problems. Both have been harshly criticized for quality, especially the quality of their vehicle interiors. Nissan has made vast improvements of late, particularly with the Altima as well as the Titan. Nissan was helped in that effort by Doug Betts, the former Toyota quality guru stolen by Nissan. Ironically, Chrysler snatched up Betts from Nissan earlier this year to help with its quality issues.

MPV: Nissan has announced plans to bring the Nissan Cube, a small, boxy and roomy multipurpose vehicle from Japan to the U.S. in 2010. Chrysler has been scrounging the globe for a platform to bolt on its popular Dodge Hornet concept. Could it be the Cube could provide the underpinnings for the Hornet?

Photos by Manufacturers
1 - Nissan Altima (photo by Nissan)
2 - Nissan Quest (left - photo by Nissan)
3 - Dodge Grand Caravan (right - photo by Chrysler)
4 - Nissan Altima (left - photo by Nissan)
5 - Dodge Avenger (right - photo by Chrysler)

Posted by Michelle Krebs at 5:48 AM under Chrysler , Companies , Featured , Technology | Comments (1) | digg this | Seed Newsvine