Chrysler and Nissan Cancel Product Sharing Agreements – What’s Next?
Yesterday, the news came out that the flurry of rebadged/rebodied vehicles that Chrysler and Nissan were hoping to sell for each other have all been cancelled. We reported this past February that the agreements were in jeopardy (as Chrysler was receiving money from the US government, pre-bankruptcy). Now, “in jeopardy” has turned into “is dead.”
This means that the announcement from January 2008 – that Chrysler would sell a version of the Nissan Versa/Tiida in South America is off the table, and the more-extensive product-sharing announcement from April 2008 – that Chrysler would sell a Nissan-built “already designed” small car (rumored to have been the Dodge Hornet) and that Nissan would sell a Chrysler-built Nissan Titan. The 2011 Chrysler-built Titan was to have had its own unique sheetmetal, interior, and driving characteristics, but I couldn’t help but think of the Chrysler Town & Country’s conversion into the Volkswagen Routan when thinking of “unique sheetmetal, interior, and driving characteristics.” I guess we’ll never know now.
So why did both companies walk away from these deals?
A lot has happened in the auto industry since these deals were inked in the early part of 2008. The economy collapsed, auto sales collapsed even more, Chrysler declared bankruptcy, truck sales went down the drain, and Chrysler is now controlled by Italy’s Fiat. Chrysler had been desperate for small cars to sell, and didn’t have the resources to develop their own cars, so enlisting a car specialist like Nissan-Renault made sense at the time. Now, however, Chrysler has access to Fiat’s technology and armada of small cars, so it doesn’t need Nissan to build a small car for it to sell in the US. And since Fiat has a strong presence in South America, there’s no need for Chrysler to sell a rebadged Nissan Tiida there that would only compete with Fiat’s offerings in the Southern Hemisphere.
Meanwhile, the sales collapse in the full-size pickup market has weaker players, like Nissan, barely hanging on. Nissan sold just 10,721 Titans so far in 2009, and 34,053 during all of 2008. At the time of the Titan’s launch for the 2004 model year, Nissan was hoping to sell 100,000 of them annually, but never reached that number, and now is nowhere close. My guess is that the projected volumes for the all-new truck just didn’t make sense from a volume standpoint (though they’d probably sell more Rams called “Titan” than Suzuki sells Frontiers called “Equator”).
And what’s next for these two companies?
Chrysler is now just a little over a year from producing several of Fiat’s excellent small cars in North America, with the cute-but-very-small 500 leading the charge. Other Fiat Group models such as the Alfa Romeo MiTo, as well as some slightly-larger cars are likely to also make the trek across the Atlantic. If all goes according to plan (ha ha!), 18-24 months from now, Chrysler’s surviving dealers should be awash in all the small cars they want to sell.
Nissan is busy converting the Canton, Mississippi plant that currently builds the Titan, Armada, and Infiniti QX56 to a factory that builds full-size van-like light commercial vehicles. The outsourcing of Titan production to Chrysler was to have freed up capacity for the LCVs, which means that the Titan currently doesn’t have a home after 2011, and therefore will probably be discontinued. Nissan could also seek to outsource Titan production to another company, but there are only three other companies that build full-size pickups GM, Ford, and Toyota – and none of the three seem to have the need to do something like a Titan rebadge. There’s also the possibility that Nissan could find another place to build the Titan and keep it in production indefinitely, or that it could rush through its own much-needed redesign of the truck. Without knowing how flexibile the remodeled Canton plant is, I have no way of knowing if it will be able to continue to build Titans alongside the similarly-sized LCVs, but again, is 20,000 to 25,000 heavily incentivized truck sales per year worth it to Nissan?
It’s too bad that we won’t be seeing the Nissan-badged Dodge Ram. While I’m not a fan of rebadged vehicles and their implicit insult to consumers (no, really, it’s a Honda Passport, not an Isuzu Rodeo), I also have something of a morbid curiousity about them. Meanwhile, management at Nissan are surely scratching their collective heads to figure out what to do about the Titan. The 2011 model year is just 12 months away, and the 2011 calendar year is less than 16 months away. Chrysler can probably make up for the lost Titan production by slightly increasing its incentive spend on the Ram if it were so inclined, so I don’t see this news as having much of an impact at all on Chrysler.