Chrysler looks to alliances to get through turbulent times

(Credit: Automotive News)

When Automotive News ran its last Chrysler future product forecast on Oct. 22, the average price for a gallon of regular unleaded gasoline was $2.82. Now, eight months later, the average price per gallon exceeds $4.

This stomach-churning climb in fuel prices, coupled with upcoming new corporate average fuel economy rules, has forced Chrysler LLC to re-examine each product program.

"Nobody forecasted it. Nobody saw this coming," says John Wolkonowicz, an analyst for Global Insight in Lexington, Mass. "A whole bunch of things conspired to create this perfect storm, and now they've got to deal with it."

Chrysler is trimming its new product budget, with only one major launch scheduled in each of the next four years. Such a schedule means Chrysler will trail its competitors.

Chrysler had planned to pare its model line before gasoline prices rose, with the goal of eliminating competing models. The automaker will wind up with about 18 models across the three brands, with a range of fuel-efficient power trains, including hybrids.

But the major focus of Chrysler's product strategy is to reduce vehicle development costs through alliances with other automakers. In fact, most of its future vehicle programs may be tied to alliances, whether as complete vehicles or sharing major components. Alliances on Chrysler LLC's horizon are:

-- Chery: Chrysler has struggled to jump-start its small-car program with Chery Automobile Co. in China. Chery is working on a range of small, front-drive vehicles for Chrysler that will be sold in North America. But none has been approved for production.

The issue? Chrysler is concerned about Chery's ability to meet the quality and safety standards Americans expect. Chrysler says it is committed to the Chery relationship, but there is no U.S. timetable for the vehicles.

-- Nissan: "You help me, I'll help you" seems to be the Chrysler-Nissan plan. Nissan will develop and assemble a small, fwd vehicle for Chrysler that draws on styling cues first seen on the Dodge Hornet concept. The car goes on sale next year.

Meanwhile, Nissan will replace its full-size Titan pickup truck with a model developed and assembled by Chrysler. Production begins in 2011.

Other projects between the two companies seem likely.

(Source: Automotive News)