Nissan, Chrysler in Talks to Work Together

TOKYO -- Nissan Motor Co. and Chrysler LLC, looking to cut costs in the increasingly competitive global auto industry, are in talks about possibly producing cars, trucks and component parts for one another, a person familiar with the situation said.

Both Nissan, Japan's third-largest automaker, and Chrysler are seeking ways to take advantage of each other's strengths. Nissan would benefit from Chrysler's experience producing large trucks while Chrysler would want to borrow Nissan's expertise in building smaller, fuel-efficient cars.

The two automakers are also considering ways to collaborate on manufacturing power train systems, the person familiar with the talks said, confirming earlier media reports of the discussions. This person said that the talks were still in their preliminary stages and no decisions were likely for two or three months.

Nissan spokesman Simon Sproule in Tokyo would not comment.

But he added, "We have always said we remain open to this kind of relationship. We have a lot of successful OEM [original equipment manufacturing] deals." One example of such collaboration was Nissan's announcement this week that it would build midsize pickup trucks for Suzuki Motor Corp. at a Nissan manufacturing plant in Smyrna, Tenn. in the United States.

While the talks with Chrysler are focusing on similar product level partnerships, Nissan CEO Carlos Ghosn still remains open to establishing a deeper alliance with a U.S. automaker. After months of discussions last year, Nissan and its French partner, Renault SA, failed to reach an agreement on a three?way alliance with General Motors Corp.

Nissan is trying to gain a foothold in the lucrative pick-up truck segment in the U.S., but has struggled to gain much market share. Chrysler is the traditional No. 3 pick up supplier behind Ford Motor Co. and GM.

Speaking to reporters in Detroit on Thursday, Chrysler Chief Executive Robert Nardelli said reports of talks with Nissan were "probably a lot on speculation," though he noted the number of alliances throughout the industry.

Chrysler, which was acquired in August by private-equity group Cerberus Capital Management LP, has been looking for new ways to cut costs. Mr. Nardelli recently began a push to get Chrysler to source more parts and components from low-cost countries. Right now it does virtually all of its $40 billion a year in purchasing in North America.

But with U.S. gasoline prices hovering above $3 a gallon, and the U.S. Congress considering a bill raising fuel-efficiency standards, Chrysler needs to add other small cars to its line up. It is short of resources, however, Mr. Nardelli has told staffers the company is on track to losing $1.6 billion this year.

Chrysler is also seeking partners to help it expand vehicle sales in international markets. It recently worked out a deal with Chery Automotive that calls for the Chinese auto maker to produce a subcompact car that will be sold by Chrysler's Dodge brand.

Mr. Nardelli also hopes to break into big growth markets such as Russia, India and Brazil, and is open to working with other auto makers to do so, people familiar with his plans said.