Chrysler rescues Nissan or the other way around?

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Chrysler plans to build Nissan’s next pick-up truck to Nissan’s designs. On the other hand, Nissan will build a small car for Chrysler to Chrysler’s design. This partnership leads to rampant speculation that the futures of the two companies may become even more entwined.
Chrysler has been desperately looking for a chance to find foreign sales that I has even considered emerging markets as the future of the auto industry. However, it has virtually no presence in any of these markets. This auto maker has been looking for a way to get a small car on the market in the United States, which has a market having the highest rate of growth in production and profits, as energy prices rise.

Nissan seems to solve both problems. Though it has become a non-entity in the full-size pick-up market, it cannot justify leaving that market. Aside from the yearning to retain its credibility as a full-line manufacturer, the market seems too large to be thrown away. Nevertheless sales have been disappointing for Toyota’s new Tundra, a lot of new trucks are yet to be sold. In some areas indeed, the rising energy costs will not appear to have dented pick-up sales.

Chrysler is Nissan’s solution to that problem. Interesting indeed but then these are manufacturing deals and not nameplate engineering deals. Taking a look back, Chrysler’s deal with Volkswagen with the version of a minivan as a Volkswagen, involved manufacture by one company of the designs of the other, and then for the showrooms of the other. Such partnership lead to the production capacity being used for manufacture of products for which the production facilities were best suited and its manufacturing techniques were best adapted. Chrysler got the added bonus of being able to move some of its Dodge pick-up production back to the States, from Mexico. This has provided way for the Nissan production lines. And that ought to mollify the UAW even a bit.

Though both companies deny it, speculations become rampant that this is only the first step toward much greater cooperation between the two companies. Nissan said that there were no discussions ongoing with Chrysler . However, the denial preceded the latest announcements by a mere two months.

The combination of Nissan and Chrysler may lead to a more successful purchasing and lower costs. This can also result to the Nissan-Renault alliance that can break into non-American markets.

Nissan has a lot to gain with Chrysler and no doubt about it survival. It needs cash from building vehicles for others, and it needs a small car. All these and more just from a big deal with Chrysler. Nonetheless, other deals can profit Chrysler as well.

In case Nissan is a bit more difficult to understand, it will be manufacturing a car that Chrysler will use to compete with Nissan. In this case, Nissan must succeed to remain competitive. In a market that is crucial to Chrysler – light trucks, a potential rival for market share comes with Nissan. This can be one reason for Nissan to refuse the deal.

While United States manufacturers, particularly General Motors, focus on world markets as the key to their future growth, Ghosn has always looked upon the US market as the key to the future growth of his companies: Nissan and Renault. With the emerging markets in the total automotive sales picture, US remains the largest market in the world for motor vehicles and will remain the second largest once Chinese auto sales grow as exponentially in the future. Such large share of market would basically benefit Nissan, as it has already made the investment in image and distribution that is the cost of entering new, emerging markets.