Is Nissan going to buy up Chrysler - makes sense and could be the kick in the pants Detroit needs

Cerberus Capital Management LP bought 80.1 % of Chrysler from the former DaimlerChrysler AG one year ago for US $7.4 billion ( and Daimler also injected US$700 Mn to sweeten the deal) and must have been excited at the business opportunites of making and selling Town & Country minivans, and iconic vehicles sich as Dodge Ram pickups and Jeep Wranglers - but who are hugely reliant on the North American market which accounts for 91% of sales.

Chrysler's sales are down 23 % so far this year, the worst drop of any major automaker. They have stopped offering leases through their financial arm because of falling truck and SUV values.

Fitch Ratings has downgraded Chrysler further into junk territory, saying it expects the company's finances to fall to the minimum levels required to fund its operations as early as next year.

Despite this Vice Chairman and President Jim Press who came Toyota Motor Corp to head marketing talks tough , "The strongest steel comes from the hottest fire, and while this is like dancing on the sun, we're making significant improvements (changes ?) in our business."

Chrysler is now private and witholds financials, but the entrail pickers going over Daimler AG figures , (still holding 19.9 % - they paid US $36 billion in 1998 for the company - DaimlerChrysler Chairman Dieter Zetsche called it "a marriage made in heaven.") put Chrysler's Q1 loss at US $510 (ish).

Chrysler negotiated a new contract with the United Auto Workers union that will cut $Billions in retiree health care costs and manufacturing wages. Over the last 18 months 29,000 hourly, salaried and temporary jobs cuts have been announced.

In June, Chrysler Chairman and CEO Bob Nardelli, who was brought in by Cerberus after a very controversial (and unpopular) stint at Home Depot Inc., defies talks of sell offs and says they will still be an independent company three years from now.

Is a Nissan Chrysler deal in the pipeline ?

Consider this

1.Chrysler has an agreement to produce trucks for Nissan
2. An agreement has just been announced for Nissan to produce the subcompact cars missing from Chryslers line -up.
3.The Wall Street Journal say a deal for Nissan to supply badged mid-size cars is in on the boil. (The July sales of the 2 Chrysler mid size compacts Dodge Avenger ( 4,318) and Chrysler Sebring (2,137) lag way, way behind the 3 leaders Toyota Camry(42,131) Honda Accord (41,382) and Nissan's Altima(24,429).

Combined the 2 Chysler models sales spread across the 3,700 delaers = 2 per dealer.

The 2 companies complement each other Chrysler’s deep strength is trucks, Jeeps and SUV's, Nissan is better at passenger vehicles. Chrysler has few overseas markets but Nissan is huge in Asia, and Nissan is big in Europe with , France’s Renault and manufacturing in the UK.

What do Cerberus do otherwise ?

Cerberus are in not in business to make cars , they make money - if they are losing it at the rate of US$2 Bn a year with a CEO plucked from outside the industry and a range of vehicles that has seen a slump in sales of 25% where do they go ?

Daimler would be happy for anyone to buy their slice for nothing.

Nissan in one go would jump over GM and Toyota in N American sales, Carlos Ghosn could get into the U.S. market.

What Mr & Mrs America wants is a range of compacts and sedans and people movers with fuel efficiency that , with gas at US$3.50 to US$4.00 a gallon at the pump makes sense - no way do they want to pay the extra cost of hybrids to get that fuel efficiency.

For example the Honda Accord Automatic 2.4 litre (Ticket price US$21,500) gives 26 mpg against the 28 mpg of the Automatic 3 litre so called hybrid (It has Variable Cylinder Management™ (VCM™) technology which shuts of 3 cylinders of the six and is based on the old Odyssey minivan engine) on which the ticket price is US$26,500 an extra US$5,000 for a theoretical 2mpg = saving 33 gallons on 12,000 miles a year = US$132 a year.

Just for readers in the US the Honda UK website gives a price of US$59,200 (24,600 pounds) on th road price for a 2.4 litre Honda Accord Vtec Automatic with a stated mpg of 32.8 mpg (UK gallons = 28 mpg in US galllons).

Hybrids may make sense for the wealthy but not for Mr & Mrs Joe Doe - Nissan know how to make decent small and mid range compacts and sedans that er economic to run - plus how to run factroies.

EPA fuel economy gives this as the most inefficient car licensed for use on US roads


Which evidently doesn't worry the sheik of Araby who had his car shipped from Bahrein to London for an oil change and apparently gas is still about US$1.33 a gallon in Bahrein.

Just imagine though - a cheese eating surrender monkey using a Japanese auto company to show Detroit how to make and sells cars in North America.