Nissan and Chrysler, What’s Next?

January 17, 2008

There’s been plenty of buzz in automotive circles, this week, following word that Nissan and Chrysler would team up to sell a Chrysler-badged version of the Nissan Versa in Latin America.

In an interview, Chrysler CEO Bob Nardelli told me he has had “no contact” with his counterpart, Carlos Ghosn, the chief executive of both Nissan and its French partner, Renault. Translation: for the time being, at least, there’s nothing to rumors that the U.S. maker would become the full, American affiliate Ghosn has long sought. Again, insiders tell us, there’s nothing to that for now.

If anything, sources suggest, this is a relationship that is likely to build one piece at a time. The Versa deal is a good one for both makers for a couple simple reasons: First, Chrysler needs to expand its presence outside North America, which currently accounts for about 91 percent of its total sales. Latin America is close and should be reasonably easy to make some headway into, especially with the right product.

As for Nissan, the automaker’s little Versa hasn’t been selling quite as well as it would like, and the Mexican plant building the minicar has plenty of excess capacity Chrysler will now absorb. In a low-margin segment, like minicars, that can make a major difference between profit and loss.

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What’s next? Talks are now well underway, we have confirmed with several well-placed sources, on a second product partnership, this one involving full-size pickups. There’s little doubt Nissan has been dissatisfied with the reception given its big Titan, since its late 2003 launch. It’s about time for the pickup to undergo a major update, a huge expense. So, it may make a lot more sense for Nissan to simply adopt a version of the next-generation Dodge Ram, which is making its debut at the Detroit Auto Show, this week.

A lot of questions remain: would Nissan build the truck at its Canton, Mississippi plant or let Chrysler roll out a version at its own pickup plant? How much different would the Nissan version be, and would the Japanese maker get the same range of offerings available under the Dodge brand – short and long beds, various cab configurations and perhaps a diesel, as well as a V-8?

Don’t be surprised to see the two budding partners make these key decisions in reasonably short order.

As Nardelli appears to believe, partnering is the best way for Chrysler to move forward. The automaker has about $3 billion a year to invest in product. That may sound like a lot, but it really isn’t, at least not for a full-line manufacturer. So the alternative is to strike deals with various global affiliates.

The Chrysler CEO made it clear that it is moving ahead on another small car deal with Chery, the ambitious Chinese carmaker. And there’s the version of its minivan that Chrysler will soon start building for Volkswagen.

Of course, there’s also the Sebring/Avenger models developed in a joint venture with Mitsubishi. Both have received lackluster receptions from critics and consumers alike. And that underscores a serious challenge with the affiliate strategy that Chrysler – and a number of other makers – have been adopting.

“Consistency is paramount,” in the words of Ford’s marketing chief, Jim Farley. That goes for everything from your advertising tagline to the product itself. The failure of the Sebring is a prime example.

Chrysler won tremendous kudos when it launched the big 300, and even as it reaches the late stages in its lifecycle, that rear-drive sedan remains one of the most exciting and freshest looks on the market. Unfortunately, the front-drive models Chrysler built with Mitsubishi have virtually nothing in common with the 300, not the underlying powertrain layout and certainly not the visual power.

It’s not all that difficult to line up a deal to share products between two or more manufacturers. But the challenge is to make sure that the version you get looks and feels like something your customers expect. It needs to be consistent with your brand image, and if it isn’t, it’s likely to fail like the Sebring. We only hope that Chrysler will learn that lesson going forward.

2009 Ford Verve Concept. Adding a little spice to Ford's small car line-up. Written by TCC Team Sunday, January 13, 2008

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