Chrysler, VW Getting Closer?

[Stéphane Dumas]

I spotted this article from the Car Connection from a link posted on Allpar forums
http://www.thecarconnection.com/Auto...ccd=de20071203

The ink is hardly dry on the Chrysler-Daimler divorce papers, but already, another German carmaker could be waiting in the wings for the American carmaker.

David Cole, chairman of the Center For Automotive Research, said competition is forcing automakers to consider options they might not have contemplated only 12 months ago.

"There is going to be another round of mergers in the auto industry and the one company that matches up well with Volkswagen is Chrysler," he noted.

Volkswagen already has a joint project with Chrysler to develop a new minivan, which will be assembled by Chrysler in the next couple of years and will be sold in the U.S.

"VW needs a strong presence in North America. In a complimentary and synergistic relationship, Chrysler has got a lot to offer. The scale that General Motors and Toyota have are absolute killers. The only thing you can do is match up to them. GM will have taken $5,000 out of the cost of a car soon," Cole noted.

Carlos Ghosn, the chairman of Renault/Nissan, has expressed an interest in Chrysler, Cole said. Ghosn said he had not spoken with anybody at Chrysler about an alliance. However, he noted, for strategic reasons, the Renault-Nissan alliance needed to bolster its relatively small presence in North America.

Cole, however, said there is little doubt VW is going to have to move quickly to develop a new North American strategy. A new study by CAR indicated autoworkers in western Europe are making almost $10 more per hour than their counterparts in the U.S. The study was finished even before the U.S. dollar began its most recent slide.

Until now, Europeans carmakers have been able to fend off the challenge by charging a premium for their vehicles and with hedging strategies in which they built different pieces of the vehicle in other parts of the world where labor costs are lower.

VW had operated an assembly plant in western Pennsylvania during the 1980s but shut it down in the late 1980s after sales of the VW models built at the factory dropped sharply. By the time it closed, the utilization of the Pennsylvania plant had dropped to under 40 percent. Since then, VW executives have talked about building cars in the U.S. again, but few observers believed they were serious since the employee representatives on the company's board of supervisors opposed the idea.

However, with the euro trading at $1.50, the idea has taken on a new urgency. Volkswagen is at the point where it needs to build more vehicles in North America if it is serious about expanding sales in this market because it will becoming too expensive to export from Europe to the U.S., Cole said.

"The euro is a killer," he said.

Meanwhile, VW officials have confirmed that the German automaker is considering building a new plant in North America.

[Uzzy]

I'm not surprised. Seems Cerrebrus is priming Chrysler for a sell off of it's divisions. Looks like VW might take the Chrysler division, Nissan would likely take the Dodge trucks part and GM might still be eyeing Jeep. MOPAR will become Nopar

[Buick61]

??? Don't the bulk of VWs sold in North America come from Mexico? Shouldn't that mitigate the effects of the Dollar's slide fairly well?

[nadepalma]

SOURCE: The Car Connection

Originally Posted by The Car Connection

Chrysler, VW Getting Closer?
VW talking up more N.A. production.

The ink is hardly dry on the Chrysler-Daimler divorce papers, but already, another German carmaker could be waiting in the wings for the American carmaker.

David Cole, chairman of the Center For Automotive Research, said competition is forcing automakers to consider options they might not have contemplated only 12 months ago.

"There is going to be another round of mergers in the auto industry and the one company that matches up well with Volkswagen is Chrysler," he noted.

Volkswagen already has a joint project with Chrysler to develop a new minivan, which will be assembled by Chrysler in the next couple of years and will be sold in the U.S.

"VW needs a strong presence in North America. In a complimentary and synergistic relationship, Chrysler has got a lot to offer. The scale that General Motors and Toyota have are absolute killers. The only thing you can do is match up to them. GM will have taken $5,000 out of the cost of a car soon," Cole noted.

Carlos Ghosn, the chairman of Renault/Nissan, has expressed an interest in Chrysler, Cole said. Ghosn said he had not spoken with anybody at Chrysler about an alliance. However, he noted, for strategic reasons, the Renault-Nissan alliance needed to bolster its relatively small presence in North America.

Cole, however, said there is little doubt VW is going to have to move quickly to develop a new North American strategy. A new study by CAR indicated autoworkers in western Europe are making almost $10 more per hour than their counterparts in the U.S. The study was finished even before the U.S. dollar began its most recent slide.

Until now, Europeans carmakers have been able to fend off the challenge by charging a premium for their vehicles and with hedging strategies in which they built different pieces of the vehicle in other parts of the world where labor costs are lower.

VW had operated an assembly plant in western Pennsylvania during the 1980s but shut it down in the late 1980s after sales of the VW models built at the factory dropped sharply. By the time it closed, the utilization of the Pennsylvania plant had dropped to under 40 percent. Since then, VW executives have talked about building cars in the U.S. again, but few observers believed they were serious since the employee representatives on the company's board of supervisors opposed the idea.

However, with the euro trading at $1.50, the idea has taken on a new urgency. Volkswagen is at the point where it needs to build more vehicles in North America if it is serious about expanding sales in this market because it will becoming too expensive to export from Europe to the U.S., Cole said.

"The euro is a killer," he said.

Meanwhile, VW officials have confirmed that the German automaker is considering building a new plant in North America.

MORE HERE

[Stéphane Dumas]

already posted
Chrysler, VW Getting Closer?

[nadepalma]

Another round of mergers? I guess this may be in the works for some companies. I would suspect that this time around, more companies may be interested in "strategic partnerships" where there is a small equity swap than full-blown mergers.

As much as I hate to say it, the cooperation between Renault and Nissan is a good exampe of such a cooperation working --- though I'm sure that not all the savings are realized.

I wonder if we may not see more such cooperations in the future --- and I also wonder if the "European model" --- one in which all automakers work with a number of automakers rather than one or two exclusive partners (think Fiat, PSA, Toyota, etc.) --- may not be part of the overall equation.

Still, if I had to choose as it relates to above, not sure if I'd rather see Chrysler cooperating with VW or with Nissan ..... at least Nissan HAS a real presence in North America.

[nadepalma]

Originally Posted by Stéphane Dumas

already posted
Chrysler, VW Getting Closer?

Didn't see it. Will merge.

[windvale]

Just my 2 cents, but due to economies of scale, I believe that someday there will be only 3 major car companies in the world. A US company (GM), A Euro company (either VW or Mercedes) and a Japanese car company (Toyota). It'll probably take decades to play out, but we've already seen this occur in industries like Defense, Commercial airliners, etc.A smaller automobile manufacturer will not be able to spend the same money on R&D as a big manufacturer, and will eventually fall behind - with extinction no far behind...

[nadepalma]

Originally Posted by windvale

Just my 2 cents, but due to economies of scale, I believe that someday there will be only 3 major car companies in the world. A US company (GM), A Euro company (either VW or Mercedes) and a Japanese car company (Toyota). It'll probably take decades to play out, but we've already seen this occur in industries like Defense, Commercial airliners, etc.A smaller automobile manufacturer will not be able to spend the same money on R&D as a big manufacturer, and will eventually fall behind - with extinction no far behind...

Maybe decades from now, but still a long way off...and even then who knows if world governments will allow this to happen...

Though, I have to say things go in cycles. Take a look at the entertainment industry. Things have a way of merging and then divesting enough to create a di-merger. Look at Viacom when it combined with the old Westinghouse to create a new company. Now it's split again as the new Viacom and CBS Corporation.

This is one small example, but sometimes it seems as though companies merge to create those economies of scale, etc. then once everyone else does it in that industry, they di-merge to become more "adaptable" to the market and run quicker as a smaller company. This seems to happen now and then.

Once something becomes commonplace, the market adapts and people look for something "unique".

Oh, well --- just my two cents to add to yours (4 cents? )

[Chaz_23]

Absolutely. Currently any misable piece of land with a flag has dozens of car makers. The number of brands owned by different people is just absurd. Just like in everything else, if Cerberus does marginally well, we'll see the rest of vultures arrive. Personally, I'd rather see some of these brands disappear altogether, at least from the US market.

Originally Posted by windvale

Just my 2 cents, but due to economies of scale, I believe that someday there will be only 3 major car companies in the world. A US company (GM), A Euro company (either VW or Mercedes) and a Japanese car company (Toyota). It'll probably take decades to play out, but we've already seen this occur in industries like Defense, Commercial airliners, etc.A smaller automobile manufacturer will not be able to spend the same money on R&D as a big manufacturer, and will eventually fall behind - with extinction no far behind...

[DuSpinnst]

"Super Companies" don't work out over time, no matter the industry.

Look at the buying and selling of record companies, and other entertainment entities (movie studios). People align, merge, spinoff, merge again, etc...

The only "Super Companies" that work are Conglomerates like Siemens and General Electric. The reason they work is that they really don't manufacture much, they mostly buy add-value and repackage. That and they do a LOT of research (which they sell to other people).

GE is famous for making something thru research, getting it started in initial production, spinning it off to a separate company but continuing to buy the item, add value to it via services, and then sell it to someone else who distributes it.

The money is in INVENTING and OWNING IP, not in MAKING.

[K Dawg ONE]

Originally Posted by Uzzy

Seems Cerrebrus is priming Chrysler for a sell off of it's divisions.

100% agree. Right now, Chrysler Canada is doing MAJOR business on its 24-mo leases. Caliber is like $100/mo, avenger $150, Sebring $250, Dakota $150, etc, etc. These are all 24km/y leases with nothing down. We (GM) cant even touch these prices even with Wish and Win, loyalties, Car Heaven, AND MONEY DOWN (and on 48mo low km leases to boot!)!
My guess, Cerrebrus is gonna get everyone into the cheap 24mo leases NOW to bump their numbers so that they appear to be a much more profitable copmpany to attract buyers.
Sure, in 2 years Chrysler will be up 'sh!ts-creek' because no one will buy out the lease returns (and people will be sticker-shocked when they are used to under $200/mo payments and now have to pay $500/mo for their next Chrysler), but, Cerrebrus will be loooooong gone!

[Perian]

Originally Posted by Buick61

??? Don't the bulk of VWs sold in North America come from Mexico? Shouldn't that mitigate the effects of the Dollar's slide fairly well?

VW's back is up against a wall in Mexico. Plant has a rated capacity of 7950 units per week - last week they produced over 10,000.

This will be really simple - if VW announces a new NAFTA area plant in the next few weeks as rumor has it - they won't have much use for Chrysler.

However, as we know - they have seemed to pull back on the idea.

They will have many CG plants to choose from should they form some kind of venture.

[1G6]

I hope Chrysler doesn't let VW off the hook. The currency situation will drive them out of this market eventually - good riddance.

[Caleb02]

Originally Posted by Uzzy

I'm not surprised. Seems Cerrebrus is priming Chrysler for a sell off of it's divisions. Looks like VW might take the Chrysler division, Nissan would likely take the Dodge trucks part and GM might still be eyeing Jeep. MOPAR will become Nopar

GM has Chevy Truck, GMC Trucks, and Hummer Trucks. I really doubt that GM needs another division that sells trucks and suvs. How would the pecking order be?

Chevy trucks = Entry level
GMC = Mid Level or near luxary
Hummer = Serious 4x4 off road user
Jeep = ? maybe car based SUVs like the compass and Liberty with some hard core 4x4 off road but just under the hummer brand like Geo was