Bad Economy May Kill Chrysler-Nissan Alliance

Nissan is reviewing its tie-up plans with Chrysler as the Japanese automaker struggles to boost profitability amid a global downturn.

Nissan Motor Co. has decided to put on hold the plans to Chrysler produce a full-size pickup truck for Nissan by 2011, and for Nissan to produce a small car for Chrysler LLC by 2010, Nissan spokesman Mitsuru Yonekawa said Friday.

The deal, inked last year, to have Tokyo-based Nissan supply a model based on the Versa model, to Chrysler for sale in South America starting this year, is still on, he said.

But the other partnership plans are being looked at again in detail as part of an overall cost-cutting effort at the embattled company, Yonekawa said.

Such deals are called an OEM, or "original equipment manufacture," agreement in the auto industry. That means one automaker supplies products to another company for the second company to sell under its own brand.

Chrysler Vice Chairman Jim Press said Thursday in Chicago that the tie-up is still on, and said Chrysler just reviewed interiors for one of the projects.

But Frank Klegon, Chrysler's product development chief, conceded the Nissan deal would duplicate some products from Italian automaker Fiat SpA, with which Chrysler has recently announced an alliance.

Klegon said Chrysler, based in Auburn Hills, Michigan, is still working with the Japanese automaker, but he also noted that no contract has been signed with Nissan.

Earlier this week, Nissan said it will sink into a net loss for the fiscal year through March — its first such loss since the year ending March 2000 — the year when Chief Executive Carlos Ghosn was sent in by French alliance partner Renault SA to turn around money-losing Nissan.

After announcing the dismal forecast, Ghosn told reporters that pursuing alliances during such hard times didn't make sense and securing financing is the top priority for Nissan.

Nissan, which makes Infiniti luxury models and the Z sports car, also announced 20,000 job cuts and said it is seeking government assistance. The automaker confirmed it has applied to the U.S. Department of Energy for assistance through a $25 billion loan program designed to help carmakers develop more fuel-efficient cars.

Chrysler has been struggling even before the recent slump. Last year, it accepted $4 billion in government loans and is racing to develop a viability plan to show to the U.S. government by its Tuesday deadline.

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