Chrysler seeks new alliances in China, India, Russia

August 14, 2008
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, Michigan, August 14 – A year after divorcing from Mercedes Benz, Chrysler LLC is actively seeking new – but more limited – alliances with a number of other automakers, a senior executive said Wednesday.

The US automaker has entered partnership talks with automakers in Russia, China and India and has also been approached by Italy\’s Fiat, Chrysler vice-chairman and president Tom LaSorda said.

These partnerships will help it expand globally and also survive an expected consolidation of the automotive industry.

"In the next five to ten years I see more consolidation in every region of the world," LaSorda told a conference sponsored by the Center for Automotive Research in Traverse City, Michigan.

"We should expect to see Chinese automakers exporting to North America soon, as well as European manufacturers bringing their small cars here to manufacture and sell here as well as export back home to take advantage of the weak dollar."

LaSorda does not expect Chinese manufacturers to set up plants in the United States any time soon, but said they may do so soon in markets such as India and Russia where tariffs and duties make imports uncompetitive.

While Chrysler is a small automaker, its wealth of intellectual property in areas such as advanced manufacturing, safety and emissions controls make it an attractive partner for automakers in emerging markets, LaSorda said.

Chrysler has "had discussions with multiple companies in Russia" and hopes to seal a deal "by the end of the year," LaSorda told reporters on the sidelines of the conference.

Chrysler has also had discussions with "many companies" in India and held talks with Great Wall Motor in China.

"The rest of the regions it\’s going to be more about working with other companies on, say, platforms or specific deals on buying products."

LaSorda did not discuss whether any of the alliances could lead to a full merger but Chrysler insiders said this would be unlikely, as the automaker needs more time to recover from the failed marriage to Mercedes.

A deeper alliance with Nissan is possible but unlikely, LaSorda said, adding "we\’re busy right now."

Chrysler is not holding "formal discussions" with Fiat, but the Italian automaker did inquire about the possibility of using some of Chrysler\’s excess capacity to reenter the US market, LaSorda said, adding that Chrysler was not the only automaker Fiat approached.

Meanwhile, Chrysler still expects to introduce a vehicle built by China\’s Chery in Mexico and South America in 2009, despite a number of delays resulting from quality problems.

"We\’re not going to be putting any name plate on it until we can be rest assured it meets all of our standards," he said. "That has been the biggest delay in that product program – it did not meet our standards."

Chrysler has also started producing a minivan for Volkswagen that will be sold in North America next year.

And its partners should not be concerned that these deals will be negated because of Chrysler will founder or be sold by its new owner, Cerberus Capital Management, LaSorda said.

"No one is going to buy a car company like this in the market that it\’s in and expect \’okay why don\’t we see if we can go sell it now after one year,\’" he told reporters.

"They\’re holding on for the long-term," he told reporters.

Private ownership has allowed Chrysler to "get leaner, faster and more decisive" and the company is "meeting – or exceeding – its financial targets," LaSorda said.

Chrysler recently announced plans to lay off more white collar workers and slash its production as it struggles against a sharp drop in sales amid high gasoline prices, a weakening US economy and stiff competition from Asian competitors.

LaSorda said these were "tough but necessary decisions" and that the company has identified over a billion dollars in non-earning assets it can sell to generate cash, more than half of which have already been sold.

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