Christine Tierney, Scott Burgess and Alisa Priddle / The Detroit News
Nissan Motor Co. and Chrysler LLC said Thursday that they may scuttle two agreements to build vehicles for each other because of the severe global downturn.
Under the terms of three product-sharing deals struck last year, Nissan agreed to build two subcompacts for Chrysler -- one for sale in South America later this year and another for the U.S. market in 2010 -- while Chrysler agreed to make a full-size pickup for Nissan.
Nissan said it was still on track to produce small cars for Chrysler to sell in South America but the other projects were under review.
"Because of current economic conditions, Nissan and Chrysler teams working on the two other projects have been asked to ensure that financial objectives for both companies can be met before these two projects move forward," it said in a statement.
Last Friday, Nissan announced that it expected to lose $3.9 billion for the Japanese fiscal year ending on March 31, its first full-year loss since 1999. It said it would cut 20,000 jobs worldwide, cancel some new models and trim investment to restore its profitability.
The Japanese automaker did not refer on Thursday to Chrysler's talks to form an alliance with Italy's Fiat SpA that would include small-car technology sharing. But the Chrysler-Fiat discussions have raised concerns about the outlook for Chrysler's vehicle projects with Nissan.
Chrysler confirmed that two of the projects were under review. "Earlier this year, due to the current economic conditions, Nissan and Chrysler leadership directed their teams working on (those) two projects to work together in the first quarter of 2009 to improve the financial objectives for both companies before the projects move further forward," the automaker said in a statement.
Last year, Chrysler and Nissan discussed deeper cooperation that would have brought the Auburn Hills automaker into an alliance with Nissan and its French partner and controlling shareholder Renault SA.
But those talks, as well as discussions for a merger of Chrysler and General Motors Corp., foundered as the global economy weakened and automakers scrambled to conserve cash.
Reports that the Nissan-Chrysler vehicle projects were at risk first surfaced Thursday in the Japanese media.
Unless Fiat or another automaker could quickly supply Chrysler with a small car for the U.S. market, a collapse of the projects with Nissan could leave Chrysler struggling to meet the U.S. government's demands that it produce more fuel-efficient cars.
Meanwhile, it is not clear what Nissan will do if the pickup deal falls through. Nissan has already scheduled other products for the Canton, Miss., plant where it makes the current Titan pickup.
Speaking in Chicago, Chrysler Vice Chairman Jim Press said the automaker was striving to become profitable even if industry sales totaled less than 10 million cars and trucks annually for the next four years.
U.S. car and light truck sales dropped to 13.2 million last year from 16.1 million in 2007, and most forecasters believe the market will shrink further this year.
"It would be a mistake to assume that this 10-million market is an aberration," Press told a crowd of dealers and Midwest businessmen at the Economic Club of Chicago luncheon Thursday.
Press said the company was proceeding with a massive restructuring -- cutting its lineup of nonprofitable vehicles, trimming 32,000 employees from its work force and shedding assets.
By the end of the restructuring, Press said, the automaker will have eliminated 1.3 million units of production capacity and cut its fixed costs by $3.8 billion.
All of Detroit's automakers are struggling in this downturn, but Chrysler has been hurt by the preponderance of large vehicles in its lineup. For instance, it has no subcompact.
Stephanie Brinley, an industry analyst for AutoPacific Inc., said Chrysler was wise to prepare for the toughest scenario. "I think that the recovery is going to be slow, but not that slow," she said.
source: http://www.detnews.com
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