Chrysler and GM Hold Talks on Joint Project
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By MICHELINE MAYNARD
Published: February 15, 2007
DETROIT, Feb. 15 ­- The Chrysler Group and General Motors are holding preliminary discussions about a joint project that would provide Chrysler with a version of the big Chevrolet Tahoe sport utility, people with direct knowledge of the talks said Thursday night.
There is no indication when the two companies might reach a conclusion in the talks, which have been under way for about six months, these people added. They insisted on anonymity because of the sensitive nature of the discussions, which were described as being in the very early stages.
A spokesman for Chrysler declined comment Thursday night. A G.M. spokesman, Tony Cervone, added, "We don't comment on future product plans." Any kind of an arrangement most likely would require approval of the two companies' boards.
Word of the negotiations came a day after Chrysler's parent, DaimlerChrysler, said it was leaving its options open on Chrysler's future, leading to speculation it could spin off the American car company. Daimler-Benz and Chrysler merged in 1998.
On Wednesday, Chrysler said it would cut 13,000 hourly and salaried jobs and close all or part of four plants as part of a restructuring plan. The automaker, which ranks fourth in the United States behind G.M., Ford Motor and Toyota, lost $1.5 billion in 2006.
Discussions between G.M. and Chrysler, which were first reported Thursday by The Wall Street Journal, were described by those with knowledge of them as "ongoing and positive" but far from complete.
The talks got under way around the same time that G.M. was in talks with Renault and Nissan about a possibly global alliance. Those negotiations later fell apart when the two sides could not agree on the value of a deal, and have nothing to do with the current talks with Chrysler, people with knowledge of those discussions said.
Under the most likely situation, G.M. would produce a big S.U.V. for Chrysler to sell in the United States and other markets. G.M. builds Tahoe as well as a sister vehicle, the G.M.C. Yukon, at plants in the United States and Mexico.
Any deal with G.M. would be similar to Chrysler's recent agreement to build minivans for Volkswagen. Chrysler also has reached an agreement in principle with the Chinese automaker Chery on a venture that would build subcompact cars for Chrysler to sell in the United States.
Chrysler, whose lineup is weighted heavily toward S.U.V.'s, pickups and minivans, has talked about building a large S.U.V. for more than 20 years. But it has not been able to find a way to justify the expense of developing a big S.U.V., which it mostly likely could sell only in limited numbers.
S.U.V. sales peaked in 2002, but have fallen significantly since then, especially after gasoline prices spiked above $3 a gallon in 2005 and 2006.
In fact, the drop in S.U.V. sales was one reason G.M. lost $10.6 billion in 2005, prompting the company to initiate its own restructuring efforts.
"It's ironic that both of them are in financial trouble because they're too dependent on big vehicles, and now they're talking about doing a big vehicle together," said Kevin Smith, editorial director of Edmunds.com, a Web site that offers car-buying advice.
Still, auto companies say there is a market for big S.U.V.'s, especially for buyers with large families and those who use them for business purposes.
It is not clear when the talks might conclude or when such a vehicle would go on sale. G.M. introduced new versions of the Tahoe and Yukon in late 2005 and early 2006, meaning a Chrysler model might have to wait until it introduces fresh versions a few years from now.
But G.M. is expected to introduce a hybrid-electric version of the Yukon in 2008, using a system it is developing under another joint venture with DaimlerChrysler.
Mr. Smith said the companies' collaboration on the hybrid vehicle might be a reason for them to link up to build a sport utility.
