Chrysler, Nissan Link To Share Models
April 14, 2008

By Michelle Krebs

DETROIT -- Chrysler and Nissan announced late Monday that they will link to supply each other with products. Nissan will make a small car in Japan for Chrysler; Chrysler will sell to Nissan full-size pickup trucks it makes in Mexico to replace Nissan's Titan.

The move was not completely unexpected. The two companies had left the door open for further cooperation when they announced in January that Nissan would supply Chrysler with a version of its small Versa car for the Detroit automaker to sell in South America.

Still, this most recent revelation adds fuel to the buzz that the two companies may ultimately form a full-blown alliance. Company spokesmen in separate conference calls Monday evening, however, insisted the newest announcement was merely “an OEM product exchange," not a more far-reaching business arrangement.

Nevertheless, Nissan-Renault CEO Carlos Ghosn has said he wants a North American partner. He was spurned by General Motors, and Ford seems to have little interest, leaving only Chrysler. Meantime, Chrysler's condition, at least on the sales front, is deteriorating in the U.S. as it tries to expand globally to growth markets. It appears it could use the help of a partner.

"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."

A Win-Win

The companies said the newly announced product exchange is a win-win; it extends the product range for both companies and makes efficient use of global manufacturing capacity. It also helps each lower product development costs.

“It’s a benefit to both companies,” said Nissan's Thormann.

The companies would not reveal financial details of the deal. Chrysler Vice Chairman Tom LaSorda in his conference call said Chrysler will pay Nissan for the small car, and Nissan will pay Chrysler for the truck it produces. Beyond that, he refused to give further information. Now privately owned, Chrysler divulges no financial information to the public anymore since 80 percent of the Detroit-based automaker was purchase by private equity firm Cerberus Capital Management in August.

A Small Car for Chrysler

The deal announced Monday calls for Nissan to build a small car for Chrysler to be built at its Oppama, Japan, plant beginning in 2010. Chrysler will sell the car in North America, Europe and other markets.

Chrysler's LaSorda confirmed the new small car will be a "Chrysler unique design and concept" based on a new fuel-efficient Nissan B-segment platform that is not a version of the Versa. "It will be our styling and design but use Nissan’s engineering and platform execution," LaSorda said.

Chrysler has been known to be shopping for a platform for the well-received Dodge Hornet concept unveiled at the 2006 Geneva Motor Show. The Hornet is a small-on-the-outside B-segment car with lots of room inside. But LaSorda would not confirm that is what the Nissan-built car will be. "It's a beautifully designed car that was just completed in our studios recently," he said. "I'm not disclosing its origination." He also would not discuss powertrains.

Chrysler is in dire need of a small, inexpensive car, not only in the U.S. but also in overseas markets where it is late to the party. Currently, Chrysler's smallest, cheapest model is the C-segment Dodge Caliber. In the U.S., the Caliber starts at just under $14,000, whereas cars like the Versa and the hot-selling Honda Fit are small B-segment cars that start at a couple thousand dollars less than the Caliber.

LaSorda noted that the global market for B-segment cars is more than 10 million vehicles a year. In the U.S., he said, B-segment sales totaled 330,000 vehicles in 2007 and in the first quarter of 2008, sales of the small cars are up 32 percent. "Timing is good," he said, "though I wish I had them now. But I'll wait for great cars."

A Big Truck for Nissan

For its part, Chrysler will build a full-size pickup truck for Nissan at its Saltillo, Mexico, plant for 2011. The Chrysler-built truck will replace the Nissan Titan, which was introduced in 2004 and has been an also-ran in the full-size pickup truck segment. 

LaSorda confirmed it will be built on the 2009 Dodge Ram mechanicals, but LaSorda and Thormann said it will have Nissan design.

LaSorda said as part of the January announcement of Nissan producing a version of the Versa for Chrysler, the two companies had been talking about future products where they could further cooperate. "They looked at the 2009 Dodge Ram we're launching this summer and said 'that's a great pickup.' That's how we did the deal."

Thormann said: "The new generation pickup truck is going to be clearly Nissan with Nissan attributes, styling and performance. It will maintain many of the attributes of today's Titan."

However, Thormann said it will have the added advantage of being offered in a wider variety of body configurations, including more cab styles and bed lengths, as well as additional powertrain combinations. The Titan now comes with two bed lengths, a couple of cab styles and one powertrain. "We haven't been playing in 100 percent of the truck market," he said, refusing to be specific about powertrain or other product details. He also said it was too early to say if the Chrysler-built truck would be called a Titan.

Thormann noted that since Nissan introduced the Titan, its first-ever full-size pickup truck in 2004, the segment has declined from 2.5 million vehicles a year to 2.1 million vehicles last year. It is dropping further this year, with many experts questioning if it will come back to previous levels. "Still it is a very attractive segment for us to have a product in," said Thormann.

The Titan has never been a big player in the segment, selling roughly 60,000 vehicles a year compared to industry leading Ford, which sells 900,000 F-150 models in a good year. Nissan has never achieved more than 5 percent of the large truck market in the U.S.

To even accomplish those small numbers, which have failed to keep the Canton, Mississippi, plant that makes them running at much more than 75 percent of capacity, Nissan has been forced to offer hefty incentives. Edmunds.com's analysis shows Nissan's Total Cost of Incentives, Edmunds' proprietary formula for calculating incentives, rose from $3,161 per Titan sold in January 2007 to a high of $5,229 in December 2007. So far in 2008, Titan incentives are running around $4,900 a truck.

In addition to making few inroads into the truck market, Nissan apparently did not want to invest in a new-generation Titan that met the upcoming more stringent regulations on safety, fuel economy and emissions. "This makes a good and interesting business case and something to provide customers with a competitive product in a big segment," Thormann said.

Capacity Shuffle

Both Chrysler and Nissan will have to shuffle around products to various plants in order to accommodate this new plan.

Just last week, Nissan announced the Canton, Mississippi, plant, which now builds the Titan along with other models, would become the Japanese automaker’s hub for commercial vehicles. The plant will begin making three, yet-unnamed commercial products in 2010.

Chrysler will move the current full-size trucks it makes in Mexico to its plants in St. Louis and Detroit.

Nissan, meantime, announced last week that its Canton, Mississippi, plant, which has been underutilized since it opened, will be the production hub for its light commercial vehicles. Nissan said it will invest $118 million in reconfiguring the plant to accommodate the commercial vehicles. Employment at the plant will hold steady.

The shift will displace the Nissan Quest minivan and large Infiniti QX56 SUV, which Nissan executives last week said would be moved to another facility, but did not say which ones. Speculation is that the never-a-contender Quest and the QX56 and its companion Nissan Armada, both victims of the sharp drop-off in large SUV sales, could be purged from the automaker's portfolio.

Photos by the Manufacturers
2007 Nissan Titan (photo by Nissan)
2006 Dodge Hornet concept (photo by Chrysler)
2009 Dodge Ram (photo by Chrysler

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