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Mitsubishi move may backfire on Chrysler-analysts
Fri Apr 23, 2004 03:38 PM ET
By Tom Brown
DETROIT, April 23 (Reuters) - DaimlerChrysler's decision not to bail out Mitsubishi Motors Corp. could hamper efforts to return its Chrysler division to long-term profitability by driving up product development costs, analysts said on Friday.
Chrysler officials repeatedly have touted the savings in development and procurement costs thanks to Daimler's partnership with Mitsubishi, and the U.S.-based unit is involved in several key ventures with the ailing Japanese automaker.
The companies' joint ventures include a development program for the "world engine," a new four-cylinder engine for global use, as well as development of small and mid-size cars.
DaimlerChrysler Chief Financial Officer Manfred Gentz said on a conference call on Friday that cooperation between Mitsubishi and Chrysler on new vehicle development and production would continue since it is based on commercial agreements that will remain in place.
But some analysts say the joint programs could derail anyway, given widespread doubts about Mitsubishi's future.
"The cooperation has been quite extensive and if you imagined it just coming to a sudden halt, then that would certainly be a burden for Chrysler," S&P auto analyst Scott Sprinzen told Reuters. "We have no indication that that's going to happen, but certainly the financial condition of Mitsubishi is very uncertain at this point," he said.
Analysts say it is too soon to gauge the extent of the potential self-inflicted injury on DaimlerChrysler's American operations. But Michael Robinet, an analyst who tracks the auto industry for CSM Worldwide in Northville, Michigan, said he saw little near-term impact on costs and Chrysler's product development.
"As far as the C-D platform at Chrysler, they essentially borrowed some designs from Mitsubishi, modified them heavily and have procured them in their own way with their own supply base. So I really honestly don't see much of an effect for DaimlerChrysler in North America, whether Mitsubishi survives or not," Robinet said.
C-D platform refers to the basic underpinnings of upcoming small and mid-size cars, including a replacement for the aging Chrysler Neon due out in late 2005.
Robinet acknowledged that "lower economies of scale" could hurt Chrysler if its cooperation with Mitsubishi fails to continue, however.
Chrysler spokesman Jason Vines declined to comment on the future of joint product development with Mitsubishi. "This is, I would say, the beginning of the story and not necessarily the end of the story," he said.
Despite potential trouble for Chrysler, several analysts saw DaimlerChrylser's decision to stop pumping money into Mitsubishi as welcome news.
Article Here
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Fri Apr 23, 2004 03:38 PM ET
By Tom Brown
DETROIT, April 23 (Reuters) - DaimlerChrysler's decision not to bail out Mitsubishi Motors Corp. could hamper efforts to return its Chrysler division to long-term profitability by driving up product development costs, analysts said on Friday.
Chrysler officials repeatedly have touted the savings in development and procurement costs thanks to Daimler's partnership with Mitsubishi, and the U.S.-based unit is involved in several key ventures with the ailing Japanese automaker.
The companies' joint ventures include a development program for the "world engine," a new four-cylinder engine for global use, as well as development of small and mid-size cars.
DaimlerChrysler Chief Financial Officer Manfred Gentz said on a conference call on Friday that cooperation between Mitsubishi and Chrysler on new vehicle development and production would continue since it is based on commercial agreements that will remain in place.
But some analysts say the joint programs could derail anyway, given widespread doubts about Mitsubishi's future.
"The cooperation has been quite extensive and if you imagined it just coming to a sudden halt, then that would certainly be a burden for Chrysler," S&P auto analyst Scott Sprinzen told Reuters. "We have no indication that that's going to happen, but certainly the financial condition of Mitsubishi is very uncertain at this point," he said.
Analysts say it is too soon to gauge the extent of the potential self-inflicted injury on DaimlerChrysler's American operations. But Michael Robinet, an analyst who tracks the auto industry for CSM Worldwide in Northville, Michigan, said he saw little near-term impact on costs and Chrysler's product development.
"As far as the C-D platform at Chrysler, they essentially borrowed some designs from Mitsubishi, modified them heavily and have procured them in their own way with their own supply base. So I really honestly don't see much of an effect for DaimlerChrysler in North America, whether Mitsubishi survives or not," Robinet said.
C-D platform refers to the basic underpinnings of upcoming small and mid-size cars, including a replacement for the aging Chrysler Neon due out in late 2005.
Robinet acknowledged that "lower economies of scale" could hurt Chrysler if its cooperation with Mitsubishi fails to continue, however.
Chrysler spokesman Jason Vines declined to comment on the future of joint product development with Mitsubishi. "This is, I would say, the beginning of the story and not necessarily the end of the story," he said.
Despite potential trouble for Chrysler, several analysts saw DaimlerChrylser's decision to stop pumping money into Mitsubishi as welcome news.
Article Here
