Chrysler Nissan Deal: One More Step To Oblivion For Chrysler?
The Wall Street Journal today published a story stating, according to
un-named sources, that Chrysler is in talks with Japanese automaker
Nissan to essentially supply the Auburn Hills, MI carmaker with
mid-sized cars derived from the Nissan Altima.
Such a deal would come on the heels of an agreement for Nissan to supply
Chrysler with a version of the Nissan Versa as it next small car. In
turn, Nissan is getting out of the business of building its own
full-sized pickups and is going to replace the Titan (currently with
$10,000 of incentives on it) with a version of the Dodge Ram.
As Chrysler strikes more deals like this to have other parties make its
cars (it also has a deal for Chinese automaker Chery to build a small
car, but the state of that deal seems in question), one wonders what the
company is turning into. The WSJ compared the emerging model at Chrysler
with that of Dell Computer, which is more of a computer assembler of
supplier parts and modules than an innovator in its own right. I might
draw a different comparison. Chrysler is shaping up to look more like a
Chinese state-owned automaker that relies on joint ventures with other
automakers for new models rather than a company that will innovate on
That may be too harsh. After all, Chrysler figures to remain in the
minivan business, which it has led, as well as the pickup truck business
where it has had a niche. And it will continue to build SUVs, especially
for the Jeep brand, which remains the company’s most valuable brand
asset. Minivans and pickups don’t exactly look like a growth industry
right now, but they are two vehicles that Chrysler knows how to do much
better than Nissan.
But Chrysler’s brands are nowhere when it comes to passenger cars. Dodge
cars attract a very low quality credit-score buyer, and have very low
trust, according to stats I have seen from Strategic Vision in the last
couple of years. Chrysler brand is not much better. The newest
models—Avenger and Sebring (pictured above)—score in the cellar on J.D.
Power’s quality and APEAL rankings. The PT Cruiser has seen its day. And
even the once hot Chrysler 300 seems to have lost its freshness. Even
when the 300 was hot, it did nothing to move the numbers in terms of
what people thought of the Chrysler brand. It was as if the buyers were
looking past the Chrysler brand and just focusing on the 300 badge and
Even the current Sebring and Avenger, which would be replaced by the
Altima derived cars if a deal is cut, were developed along with
Mitsubishi. That program, in which Chrysler had a lot to say about the
outcome on styling and engineering, has yielded a terrible outcome. Its
development was undercut along the way by difficult working relations
between the two companies. When companies and staffs are not financially
and emotionally fully invested in the success of vehicles, expect trouble.
I am at a loss about why a discerning customer would opt to buy a Nissan
Versa or Altima derivative from a Chrysler or Dodge dealer. For
Chrysler, it would seem to be a strategy just to keep the lights on for
dealers and those who remain strangely fixated on buying Chryslers and
Dodges even when they are Nissans. Too, the profits of such vehicles for
the automaker are very small when you outsource a car. That means those
cars get very little marketing support. Look at GM and the very little
attention it pays to Pontiac Vibe, which is built in the company’s
joint-venture plant (managed along with Toyota), and is mechanically the
same as a Toyota Matrix and Corolla. GM makes very little on those cars,
but they are important to GMC/Pontiac dealer sales volume especially
when SUV sales have gone South.
There are lots of joint ventures in the industry today. But outsourcing
car production and engineering to Nissan--if this second deal goes
through--looks like a strategy for treading water until the company is
sold, stripped or more fully integrated into Nissan. It doesn’t look
like a play to make Chrysler independent and vibrant.