By on October 22, 2008

We’ve been largely ignoring this possibility because, well, the GM – Chrysler merger thing is a much more appealing possibility, in that “how nuts do you have to be to be a top executive for a domestic car company” kinda way. But now that it’s OK to write news reports based entirely on anonymous sources, well, why not Chrysler – Nissan? I mean, Chrysler – Nissan – Renault? I mean, Carlos “The Jackal” Ghosn?  And The Detroit News is there! “The Renault-Nissan alliance is proposing to acquire around 20 percent of Chrysler LLC and bring the Auburn Hills automaker into the French-Japanese automotive partnership, according to sources familiar with the situation… Sources familiar with the discussions said Carlos Ghosn, CEO of both Renault SA and Nissan Motor Co., sent a proposal in recent days that included revisions to a draft agreement prepared by Cerberus… The sources said Tokyo-based Nissan would acquire the stake because it has cash on hand, whereas Renault now has debts of more than $5 billion.” So, which company does Cerberus favor to gut Chrysler like a fish? Go ahead and jump.

“But another source close to the talks has told The Detroit News that Cerberus founder and CEO Stephen Feinberg favors a deal with GM, viewing it as the best solution for the embattled U.S. auto industry.” Huh? Feinbger is worried about the U.S. auto industry? Sure, and I’m concerned about an asteroid strike.

Anyway, the DetN’s source’s speculation raises an important question: would the Renault – Nissan – Chrysler deal be better for the American auto industry? The reporters certainly seem to think so. “By contrast, Detroit’s smallest automaker would remain largely intact as a partner in the Renault-Nissan alliance. It would participate in the joint purchasing, vehicle platform development and other programs, slashing its costs. But it would have its own management and retain its brands. There is little overlap among Renault, Nissan and Chrysler brands in most of the world.” Sure, makes sense to me. Full Chrysler Suicide Watch later today.

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22 Comments on “Nissan – Renault – Chrysler Merger?...”


  • avatar
    OldandSlow

    As much as I dislike Ghosn, this link up makes more sense than combining Chrysler with GM. Chrysler is toast as an independent US automaker no matter what comes down the pike.

  • avatar
    jerseydevil

    This does make more sense to me, if it was the purpose of Ghosen to make Chrysler profitable again. Chrysler does have some good models – ax the bad and concentrate on the good. It would also streamline Nisan operations in the US, and give a dealer stream for Renault and even Peugot and Fiat return to this market. Dont forget the impending deluge of chinese products.

    Or just wait for a bankrupcy, and pick up a cheap dealer nerwork and a few factories.

    Its interesting. I cannot imagine a combined chrylser -GM. I suppose the Italians thought this when Alfa and Ferrari were absorbed by Fiat.

    This should be interesting.

  • avatar
    Pig_Iron

    Ren/Nis/Chry is the least worst of all scenarios. I’m so freaked out about this whole GM/ChryCo thing that I’m at a loss for words.

    But, I’d like to say to any Chrysler folks, that when I started in automotive, I was pleasantly surprised to discover that the AMC and Chrysler people were the best overall in design and production.

    Renault has a good power train history. Nissan people are competent and modest for the most part. It seems to be a better fit culturally. Here’s hoping.

  • avatar
    Dr Lemming

    I still don’t understand why Renault/Nissan needs Chrysler. Nissan already has a pretty good footprint in the US — and competes in numerous segments against Chrysler. Given that, shouldn’t Renault/Nissan judiciously enter new segments rather than seek a wholesale expansion? Or is this alliance so fragmented that Ghosn will not be happy until Renault comes back to the US in such a way that it effectively competes against Nissan?

    For the sake of discussion let’s assume the latter even though that’s a nutty strategy worthy of GM. If Renault wanted a greater presence in the US why not buy only what it needs, e.g., Jeep? Or wait until Chrysler’s death and pick up a few select pieces (e.g., plants) at the estate sale?

    All that aside, Toyota and Honda have done very well in their expansion efforts without going on an acquisition binge. What’s the logic behind Nissan deviating from that proven strategy? Looks like nothing more than feeding Ghosn’s ego to me.

  • avatar
    Ingvar

    “Or just wait for a bankrupcy, and pick up a cheap dealer nerwork and a few factories.”

    Perhaps they can’t wait, because if they do, GM will absorb Chrysler instead? Better to buy now than let GM starve Chrysler to death. If Renault/Nissan has a plan, less people will be sacked.

  • avatar
    Dr Lemming

    Ingvar: Why does Renault/Nissan need to acquire a “cheap dealer network?” How does that help their competitive position?

  • avatar
    menno

    Here’s what the worldwide auto industry looked like in 2007.

    http://en.wikipedia.org/wiki/Automotive_industry

    Looks to me like GM was in 2nd place in 2007, behind Toyota.

    Interestingly enough, if you do the math, Suzuki + Mitsubishi would be the 5th largest car manufacturer in the world.

    Now, that merger actually makes sense – worldlwide.

    Not sure about the value of Chrysler/Dodge/Jeep to virtually anybody except maybe the Chinese or Indians, as a means of obtaining a nice, fat dealer network.

    But surely it’d be cheaper and easier to start from scratch (in fact, the old Daewoo auto sales network, and the dying Isuzu dealer networks are both probably available for a song, and could be added to / built upon). No actual need to buy Chrysler and get all the liabilities (of which there are more than plenty).

    I admit there’s some value in the brand name “Jeep”.

    But Jeep has virtually killed off every company which has absorbed it.

    Jeep started as Willys-Overland.

    Kaiser bought up Willys, Kaiser died off. Renamed it Kaiser Jeep just to keep their name alive (car production ceased).

    American Motors bought up Kaiser Jeep in 1970, and renamed it Jeep Corporation (a wholly owned subsidiary).

    Renault bought into AMC and departed the US with their tail between their legs and sold AMC/Jeep to Chrysler. AMC was euthanized.

    Chrysler/Jeep was absorbed by Daimler Benz, until they divorced and pushed Chrysler/Jeep off the plank into shark infested waters.

    Nobody in their right minds would want Jeep, really, when you think about it! Even folks who are not superstitious (which I’m not).

  • avatar
    toxicroach

    I guess the thinking goes that Chrysler has a truck brand that is seen as buyable, the minivan thing, and Jeep.

    My question with all this merger talk is how much debt is the buyer is going to have to assume if they pick up Chrysler? I’m sure the cash price tag will be very modest at this point, but that’s because Chrysler is a money pit, so how much money would a buyer think he was committing himself to spend?

  • avatar
    psarhjinian

    jerseydevil: Its interesting. I cannot imagine a combined chrylser -GM. I suppose the Italians thought this when Alfa and Ferrari were absorbed by Fiat.

    At least Ferrari and Alfa don’t directly compete with the rest of FIAT’s portfolio.

    Dr Lemming : I still don’t understand why Renault/Nissan needs Chrysler. Nissan already has a pretty good footprint in the US — and competes in numerous segments against Chrysler. Given that, shouldn’t Renault/Nissan judiciously enter new segments rather than seek a wholesale expansion?

    That’s a very good point. Renault is looking down the tubes of it’s own financial crisis, and the Chrysler merger is part distraction activity and part desperate clawing for marketshare.

    They could do to Chrysler what they’re currently doing to Nissan in Europe: make it into a truck/crossover brand and scrap the car lineup entirely. This makes some sense, as Chrysler has next to zero passenger-car-market equity, but still has some traction in the truck market, especially compared to Nissan.

    The problem is that any cost savings and profits from rebranding will take months, if not years, to realize. Ghosn’s not really a long-term guy.

    Dr Lemming : All that aside, Toyota and Honda have done very well in their expansion efforts without going on an acquisition binge. What’s the logic behind Nissan deviating from that proven strategy? Looks like nothing more than feeding Ghosn’s ego to me.

    Yup, Toyota and Honda have done very well without branding or acquisition madness, excepting Honda’s foray into partnerships with Rover. A lot of this has to do with the way these companies plan: they don’t set competitive sales goals, and they don’t panic over short-term results. Instead, they plan conservatively, looking at growth and stability over the long haul.

    And yes, this is partly Ghosn’s ego. He was hailed as the automotive second coming when he pulled Nissan from the fire and he’s got no reason to think he can’t do it again. But Nissan was bailed out by some excellent product offerings (notably the Altima in North America and several B-Segment cars in Europe and Japan) and a big, gaping hole in the luxury market (the Germans’ getting too costly and Lexus too soft) that they were able to aim Infiniti directly at. Some of this might be Ghosn’s work, but a lot of it is the smart product planning and engineering within Nissan.

    I agree, though, that however this shakes out, a) Renault/Nissan is a better fit and b) Chrysler days as a full-line marque are done for.

  • avatar
    cmus

    “Chrysler days as a full-line marque are done for.” – several folks

    This makes me terribly sad. I really was hopeful (regardless of the situation) that getting out from under Daimler had the potential to get Chrysler out of its (IMO) Daimler-generated issues.

    Well, I don’t think an alliance would be a bad idea. Nissan has a successful D-segment car, and a decent sub-compact platform. Both of which Chrysler needs.

    I’m gonna have to say that *if* Chrysler has all this cash that GM wants, and theoretically has a top-secret “master plan” to return to profitability (beyond just saying that they have a plan)…stick to it.

  • avatar
    50merc

    OK, maybe Chrysler has some assets that appeal to Nissan. But the talk is about Nissan acquiring Chrysler the company, not particular assets. How would Nissan dump the legacy costs, the UAW and excess dealers? They’d be subject to US law, just like GM and Ford.

    I think Holman Jenkins’ piece in today’s Wall Street Journal (the merged GM and Chrysler will be “too big to be allowed to fail” theory) is more prescient.

  • avatar
    Pch101

    I still don’t understand why Renault/Nissan needs Chrysler.

    The same reason that the earlier version of a JV had been planned — the truck line. Nissan’s efforts to break into the North American full-size truck market has failed, and despite higher fuel prices, this remains a large segment of the market. If they can buy into it at the right price (cheaply), then it makes sense to do it.

    Or just wait for a bankrupcy, and pick up a cheap dealer nerwork and a few factories.

    The resulting taint to the brand would be more costly than the money saved on the reduced purchase price. It’s better for Renault-Nissan if the brand is in a position to be saved with improved products than it would be to overcome the stigma of a bankruptcy.

  • avatar
    mikeolan

    This is the only way Chrysler will survive. And remembering the innovative pre-merger of Chrysler, it’s the best thing we can hope for.

    Given the R&D at Chrysler has come to a complete halt, this will be a necessary “blood” transfusion for Chrysler without it becoming a “K-Mart” brand any further. Chrysler will have access to build off of Nissan’s class-leading platforms, engines and transmissions and whatever is left of Chrysler will allow it to return as the model of innovation it established itself as prior to the merger. Ghosn’s “Partnership,” instead of “Merger” is seriously the best thing Chrysler fans can hope for.

    It also seals GM’s fate.

  • avatar
    motownr

    Anyone who thinks that a Cerberus/Ghosn marriage would somehow be a kindler, gentler outcome than being parted out by GM–think again.

    Ghosn may be the meanest SOB in the industry….Nissan has among the worst factory/dealer relationships, and the turnover at corporate is nothing to brag about.

    Mark McNabb of GM used to be CG’s #1, and is likely a key player in what makes the most sense–a three way deal to unwind Chrysler.

  • avatar
    Ingvar

    “Anyone who thinks that a Cerberus/Ghosn marriage would somehow be a kindler, gentler outcome than being parted out by GM–think again.”

    As I see it, Chrysler under GM will be absolutely doomed. They will gutt the entire company, and there won’t be anyone or anything left standing. A clean sweep. Because there’s nothing in Chrysler’s portfolio that GM could possibly have a need for. It’s about brands, market share, but above all, 25 billion dollars of government handout. GM will not only absorb Chrysler, but swallow it whole. Chrysler will be a shell of it former self.

    Anything but GM will thusly be less bad. And it doesn’t matter how much evil incarnate Ghosn really is, his interest in Chrysler is on another level. Renault/Nissan will not buy Chrysler just to let it seize to exist. Therefore, that option must be seen as a wiser one, from some sort of objective standpoint.

  • avatar
    motownr

    @ingvar:

    Chrysler as we know it is doomed. There simply too much capacity in NA, and CLLC has insufficient products in the pipeline to survive the shakeout.

    What are the prospects of Chrysler remaining an independent firm? One with an unwilling majority shareholder and an empty cupboard of volume products? Very simply: there is no future.

    A GM smashup might be ugly and motivated by a desire by GM to avoid Chapter at any cost, but for Chrysler’s dealers and fans, it may wind up being the best outcome.

    My $.02

  • avatar
    guyincognito

    psarhjinian: “I agree, though, that however this shakes out, a) Renault/Nissan is a better fit and b) Chrysler days as a full-line marque are done for.”

    +1.

    I’m not sure that it will be better or cheaper for Renault/Nissan to puck up Chrysler pre-bankruptcy though. I wonder if the whole GM-Chrysler merger thing was an attempt a scaring Ghosn into making the deal now rather than waiting.

  • avatar
    Pch101

    I wonder if the whole GM-Chrysler merger thing was an attempt a scaring Ghosn into making the deal now rather than waiting.

    If Cerberus can walk away with much of the cash that is sitting on Chrysler’s balance sheet, the GM deal is substantially better for Cerberus than the Renault version. Renault is proposing taking a minority stake, while GM would remove the problem from its hands.

    Cerberus is shopping it to anyone who will listen. If the GM thing doesn’t work out, then they’ll probably run to Renault because it’s the next best option. Not optimal, just better than nothing.

  • avatar
    folkdancer

    When I was a boy in the late 50’s statisticians looked at population growth, number of cars being sold, and the frequency of breakdowns of these cars and told us that 1 out of every 10 boys would have to become an auto mechanic.

    What happened? The Japanese started sending us cars in the 1970’s that didn’t break down.

    In the 1950’s it was common to take a car in for service almost every month. Thankfully those days are long gone. Car quality has improved tremendously.

    What I am getting at is that I want you guys to stop making the assumption that a car manufacturer needs or should even want dealers. No manufacturer in their right mind should want Chrysler or GM dealers.

    In the future I see cars sold on Amazon.com. If you need some help a technician will visit your home and make some final adjustments, similar to way Dell sells computers. We can read reviews just like we read TTAC to see if others mention if the seats have good lumbar support and if the trunk has a flat floor or a nasty lip. We can easily ask questions of each other.

    The manufacturers could establish repair stations or authorize local shops to sell parts and make repairs.

    We must remember that currently we are NOT Chrysler’s, GM’s, Ford’s, Toyota’s, Nissan’s, Kia’s, etc’s customers! Their dealers are their customers and as has been pointed out many times on TTAC GM’s dealers all want to sell a full line of products and this has caused havoc in GM’s brands. GM has been answering THEIR customer’s pleas and suggestions and not ours.

  • avatar
    Pch101

    In the future I see cars sold on Amazon.com.

    I don’t. Cars are too expensive to sell themselves. Most customers need to be convinced to take the plunge and sign the papers.

    Sears tried to sell cars through its catalog, back when it was the equivalent of Amazon. Despite being popular and well branded, Sears failed in its efforts. Selling a car is not like selling a book or the shelf that it sits on, and it will never become one just so long as a car remains the second most expensive item to purchase for most of us.

  • avatar
    folkdancer

    In the future I see cars sold on Amazon.com.

    I don’t. Cars are too expensive to sell themselves. Most customers need to be convinced to take the plunge and sign the papers.

    Sears tried to sell cars through its catalog and failed.

    The internet is a big improvement over a one-sided catalog. Many of the first companies that built cars and computers failed but others kept trying and succeeded.

    Hopefully many have realized that they were convinced to buy more car and more loan than they should have and will be more realistic in the future.

    I still feel that dealers are obsolete, expensive, a clumsy way to sell, and potentially annoying to the final customer.

    We should keep our minds open and not assume the way things were done in the past will continue.

  • avatar
    hughie522

    Further proof that, “Those who do not learn from history are doomed to repeat it.”

    As with the U.S. federal government bailing out Chrysler before, another French carmaker (Peugeot) bought Chrysler Europe for $1 in the 1980s, resurrected Talbot, was unable to sell the damn thing and then did a, “Let’s call the whole thing off.”

    *Sigh*


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