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Nissan to supply cars to Chrysler

An agreement for Nissan to build small cars for Chrysler to sell in South America is another step in Chrysler's ongoing quest to become more global, one of Chrysler's top executives said.
/ Source: The Associated Press

An agreement for Nissan to build small cars for Chrysler to sell in South America is another step in Chrysler's ongoing quest to become more global, one of Chrysler's top executives said Friday.

The Japanese automaker and Chrysler LLC announced the deal Friday that will have Nissan supply versions of its Versa subcompact for Chrysler to sell in undisclosed parts of South America. No specific terms were announced.

But Chrysler President and Vice Chairman Tom LaSorda said during a conference call with reporters that the company will continue to talk with Nissan and other global automakers about similar product-sharing deals.

"We're working on other stuff with other companies," LaSorda said.

Nissan Motor Co. will supply the cars, which also are sold as Nissan models, to Chrysler LLC so the U.S. automaker can sell them under its own brand.

Such agreements are fairly common among automakers and are far short of a major alliance like the one Nissan has with Renault SA of France. But they can dramatically cut costs and strengthen product offerings immediately.

A top Nissan executive said that discussions continue with Chrysler about sharing other products.

"We've agreed to maintain an open dialogue to explore further product opportunities," Dominique Thormann, senior vice president of administration and finance for Nissan in North America, said in a telephone interview. "Today, this is what's on the table. I can't tell you if this is going to be a one-shot single transaction, or does it blossom into something more?"

Nissan has flirted with the idea of a U.S. partner, to solidify its position in North America, but talks with U.S. automaker General Motors Corp. in 2006 fell apart.

Nissan Chief Executive Carlos Ghosn, who also heads Renault, has said the company is open to partnerships if they have potential to be successful like the Renault-Nissan alliance.

There also has been speculation that Chrysler may build pickup trucks for Nissan as part of the deal, but Thormann and LaSorda said that's not in the agreement.

"There's no quid pro quo," Thormann said.

Yet LaSorda said Chrysler and Nissan are still talking.

"Where there's a win-win that could be there for both parties, we'll continue dialogue," he said.

Chrysler and Nissan also said there are no plans to bring a Chrysler-badged Versa to North America, even though Chrysler currently has no entry in the fast-growing subcompact or "B car" market.

Last year, Chrysler announced a deal with China's biggest independent car company, Chery Automobile Co., to jointly produce and export small cars to Western Europe and the United States. Chrysler also is building a minivan for Volkswagen AG.

Lin Zhang, general manager of Chery International, told The Associated Press in November that production of a Chery-built Chrysler for the U.S. is at least three or four years away.

LaSorda said Chrysler was sinking more resources into the Chery venture to accelerate it and would double the 150 or so people working on it in the next 18 months.

Tom Libby, senior director of industry analysis for J.D. Power and Associates, said the subcompact segment will grow more important for Chrysler and others in the coming years because the market is growing due to high fuel prices and because small cars are needed to meet stronger U.S. fuel economy standards.

"All the mainstream brands need an entry in the B segment as soon as they can get one," he said.

Nissan will build the cars for Chrysler at a factory in Mexico, where the current Versa is produced and distributed to the United States, South America and other markets. They would go on sale in 2009 as 2010 models, Chrysler said.

Chrysler has been eager to expand international sales through tie-ups, partly to expand in emerging markets to offset declining U.S. sales.

Nissan, Japan's No. 3 automaker, turned itself around from near-bankruptcy under the 1999 alliance with Renault.

Chrysler, which had been losing money, became a private company in August after Cerberus Capital Management LP became the majority owner, buying an 80.1 percent stake from German automaker Daimler AG.