Nissan may be best partner for Chrysler

Nissan, the Japanese auto giant, is likely the best partner and the best fit for struggling Chrysler LLC, now that General Motors Corp. has dropped plans to acquire the company, analysts say.

"Nissan is relatively strong in small cars, and Chrysler is strong with bigger vehicles. It would be more of a dovetailing of product portfolios between those two companies," said Tom Libby, senior director of industry analysis at the Power Network at J.D. Power and Associates.

"Chrysler already has a relationship with Nissan, so that provides a potential for a reasonable fit. Whatever is done, though, it would have to be accompanied by a substantial cash war chest because all automakers are burning up an unbelievable amount of cash each month," said Jack Nerad, editorial director of Kelley Blue Book.

Under a current agreement, Nissan is to provide Chrysler with a new car for limited distribution in South America next year, and in 2010 Nissan is to provide a new fuel-efficient car based on a Chrysler concept and design to be sold in North America, Europe and other markets. For its part, Chrysler is to build a full-size pickup for Nissan, based on a Nissan design, to be built in Mexico. Sales of that truck are set begin in 2011.

Though Nissan officials confirmed last summer that they were talking to Chrysler about expanding their partnership, Renault Chief Executive Officer Carlos Ghosn said recently that "deals involving cash won't happen" during the economic slump unless the car companies "have access to a big pot of cash coming from the government."

Nissan is having its own financial problems. It slashed its full-year profit forecast by over half last month because of the dismal global car market.
"Both Nissan and Renault [which owns Nissan] are in a tough position and they're eating up cash," said Koji Endo, a Tokyo-based analyst at Credit Suisse. "It's not wise to do anything with the Big Three while their fate is still unclear."
Renault's share value has plummeted 77 percent this year and Nissan's has dropped 66 percent.

Nissan may not be Chrylser's only hope. While GM CEO Rick Wagoner said last week that the efforts toward acquisition of Chrysler have "been set aside," it does not mean that talks won't start up again.

"The talks have been called off, but not for the long term," said Mr. Libby. "They've just been called off for now. Our position is that there would be some benefits to a merger, but there would definitely be some challenges for what it would have created."

Those challenges include grappling with product and brand overlap and how to integrate the dealer networks.

Peter Morici, a University of Maryland business professor who tracks the auto industry, said there was another road that Chrysler could take.
"Chrysler ought to just go ahead and jump through Chapter 11 right now, and emerge as a smaller, leaner company -- and then sell themselves," he said.