Jeremiah 29:11

January 12, 2008

Chrysler and Nissan in Production Deal

By MICHELINE MAYNARD

DETROIT — Chrysler and Nissan of Japan took the first step toward a possible broader alliance on Friday, reaching agreement for Nissan to supply Chrysler with a small car to be sold in South America.

The car, based on the Nissan Versa, a subcompact, would be sold under “limited distribution” beginning in 2009, the companies said in a statement.

And the companies said they agreed to “maintain an open dialogue” to discuss other opportunities.

The modest agreement resulted from discussions that have been under way for months, even before Chrysler was sold to Cerberus Capital Management, a private equity firm, in August.

Still, it was a step forward for Chrysler’s new chief executive, Robert L. Nardelli, who has named two top executives to explore business ventures since he joined the company on Aug. 6.

Joint supply and production deals are common across the automobile industry, and both automakers have taken part in others.

Nissan and Ford Motor once built minivans together at a plant in Avon Lake, Ohio, while Chrysler has had a long relationship with Mitsubishi, with the two building vehicles together in Normal, Ill., at a plant now owned by Mitsubishi. Beyond that, Chrysler and Volkswagen have developed a minivan for VW to sell in the United States, beginning this year.

Chrysler also signed an agreement last year with the Chery Automobile Company of China to make cars for Chrysler to sell starting in 2009. On Friday, Chrysler’s co-president, Thomas W. LaSorda, said Chrysler could sell both Chery-produced cars and Nissan models in South America. The Nissan models will be built at a plant in Mexico that Mr. LaSorda said had extra production capacity. The deal saves Chrysler the expense of developing the vehicles on its own.

“We didn’t have to put new plants up, they had available capacity, and it just worked out well for both parties,” Mr. LaSorda said in a conference call.

He said Chrysler had not decided on a brand name for the Nissan model, nor would he say how many Chrysler planned to sell. He also would not specify the countries where it would be sold.

Nissan and Chrysler already have another joint relationship. In 2004, the companies agreed that a Nissan subsidiary would provide transmissions for Chrysler vehicles.

“Nissan has a successful track record of win-win product exchanges, and we are pleased to be entering into this second agreement with Chrysler,” said Carlos Tavares, an executive vice president at Nissan.

Analysts say the Nissan-Chrysler arrangement could become much bigger, eventually including cars that Nissan could provide Chrysler to sell in the United States, while Chrysler could provide Nissan with pickup trucks.

Nissan already sells the Titan pickup, built outside Jackson, Miss., but its sales pale next to those of the Dodge Ram, the country’s third best-selling truck behind the Ford F-series and Chevrolet Silverado.

Chrysler, whose lineup is dominated by sport utilities, pickups and minivans, could use more fuel-efficient small cars, analysts said.

“We’re maintaining an open dialogue for further opportunities.” Dominique Thormann, a senior vice president at Nissan North America, said in an interview Friday.