Chrysler Seeks A Dance Partner

A DECADE ago, when the Chrysler Corporation was struggling to avert a bankruptcy, Chairman Lee Iacocca talked of finding another auto company which Chrysler ``could dance with.'' Despite a massive government bailout in 1981, it seemed unlikely Chrysler could survive without forming a partnership with another, most likely foreign carmaker.

Confounding most observers - and perhaps even Iacocca himself - Chrysler has remained independent. But now, with car sales in the United States down 20 percent so far this year, rumors abound that the number three US automaker is looking for someone to fill in its dance card.

Chrysler has found amorous intent in a range of potential suitors from around the world, but at the moment, only the Italian automaker Fiat seems ready to whisk it out on the dance floor.

Until recently, it seemed Chrysler's most likely partner would be Japanese automaker Mitsubishi Motor Corporation of Japan, with which Chrysler has had an affiliation since 1970. That's when Mitsubishi agreed to supply small, fuel-efficient, Japanese-made cars for sale in the US under the Chrysler nameplate.

In the early and mid-1980s, it seemed as if the relationship would blossom further. Chrysler bought nearly a quarter of the Japanese automaker's stock, and together they agreed to invest more than $800-million in a new US ``transplant'' assembly line.

Operated under the Diamond-Star Motors joint venture, the plant in Bloomington-Normal, Ill., now builds cars for both Chrysler and the new US sales network operated by Mitsubishi.

Mitsubishi ties loosen

Mitsubishi Motor Sales of America has become the fastest-growing Japanese nameplate in the country. And it has become a wedge in the relationship between parent company and Chrysler. A few months ago, Chrysler sold half its stock in the Japanese company, and it has been cutting back on the number of vehicles it imports from Mitsubishi's Japanese plants.

A marriage between the two now seems out of the question.

So does any union between Chrysler and France's Renault. In 1988, they launched a joint venture to design a new generation of subcompact Jeeps. The so-called ``JJ'' sport-utility vehicles were to be built at assembly plants in the US and Europe. Chrysler insiders hoped it would be, in Humphrey Bogart's words, ``the start of a beautiful friendship.''

Instead, the two carmakers issued a joint statement in June announcing that ``the joint program ... is no longer economically attractive.'' Chrysler now plans to continue the JJ project on its own.

So who else might be waiting in the wings? Unexpectedly, Chrysler also announced in June a limited venture with Honda, which will distribute several Jeep models in Japan.

Over the years, a Honda-Chrysler linkup has occasionally been rumored, but the latest deal isn't likely a sign of more to come.

Friendly with Fiat

If any suitor may be planning a courtship for Chrysler, it's likely to be Fiat. The Italian and US automakers admit they've been talking for at least four years. Back in 1986, Chrysler considered importing a Brazilian-made Fiat subcompact called the Uno to replace its own Omni/Horizon models, but no deal came.

Chrysler did strike a deal with Fiat last year to act as the US importer for Fiat's Alfa-Romeo line of sporty luxury cars. Soon after, Chrysler Motors executive Bennett Bidwell suggested, ``The venture that we're doing with the Alfa-Romeo wing of Fiat may lead to something more.''

It's unclear what that might be, but insiders suggest the two companies are pondering a variety of linkups, possibly even an outright merger or acquisition. Initially, sources say, a modest joint venture would be more likely.

``Chrysler and Fiat would seem to be a very good fit,'' says Chris Cedergren, auto analyst with J.D. Power and Associates.

Chrysler needs small cars, and those are what Fiat does best. On the other hand, as competition in Europe intensifies, Fiat needs larger products, particularly sport-utility vehicles and minivans - Chrysler specialties.

Fiat could give Chrysler access to a broad European dealer network. And Chrysler could provide Fiat with a sales channel in the US, a market Fiat covets.

Will a deal happen? A source at Chrysler's legal department says preparatory work is under way. But insiders note that the firms have spent four years looking for a common tune, but the Alfa distribution deal is the only one they both could dance to.

You've read  of  free articles. Subscribe to continue.
QR Code to Chrysler Seeks A Dance Partner
Read this article in
QR Code to Subscription page
Start your subscription today