Foundry Daily News

Chrysler facing era of partnering

Chrysler has killed off four vehicle models, cut 12,000 jobs and handed its retirees' health plan to the union -- all in the year since New York investor Cerberus bought the bulk of Daimler's stake in the Detroit automaker.

But the company, a major industrial employer in Indiana, still looks troubled. Losses reached $1.7 billion last year and are continuing. Sales of all-important pickup trucks and sport utility vehicles fell 24 percent in May, gutted by high gasoline prices and the slower U.S. economy.

Now, auto analysts expect Cerberus will look for financial partners to help shoulder the ownership burden while Chrysler tries to line up more outsourcing ventures. Already in place: a $60 million deal to lease space in its oldest Kokomo plant to a Canadian company.

Chrysler intends to lease 250,000 square feet in its 3.1 million-square-foot Kokomo Transmission Plant to Linamar Corp., and staff the leased space with 200 Chrysler workers getting regular wages and making Linamar parts for the Getrag-Chrysler transmission plant going up at Tipton, a United Auto Workers union official said Friday.

The deal with Linamar follows separate ventures formed with China's Chery and Japan's Nissan. Each will separately make small cars for Chrysler. And Chrysler will assemble full-size pickup trucks for Nissan equipped with Chrysler Kokomo transmissions.

"It's partner or die for Chrysler,'' said David Cole, head of the Center for Automotive Research in Ann Arbor, Mich.

Ford and General Motors hurt, too. But both are larger, in the United States and abroad, which helps them spread engineering and production costs over a wider number of vehicles.

This year, Chrysler is on track to sell only 1.8 million cars and trucks, 25 percent off the pace set a few years ago amid the truck boom. Despite the decline, Chrysler officials say they are not going to mothball any Indiana operations.

"It's conceivable it could happen, but it's not part of our plans,'' said Chrysler spokesman Ed Saenz.Three transmission assembly plants and a metal casting plant, all at Kokomo, supply almost all transmissions for Chryslers, Dodges and Jeeps. The complex employs 5,400.

Nearby at Tipton, a fourth transmission plant is under construction. Part of a joint venture with German transmission designer Getrag, the new plant would employ up to 1,400, with many workers expected to transfer from the Kokomo complex.

"It's tougher for Chrysler to close its component plants,'' Cole said, noting GM's decision earlier this month to shut facilities in Ohio, Wisconsin, Canada and Mexico. "GM can close four truck and SUV plants because they have a lot of plants. Chrysler doesn't. If they close plants in Indiana, they don't have anyplace else to go for transmissions.''

The Kokomo complex, however, is scaled for the ambitious Chrysler of the 1990s, when sales of Jeeps and the Dodge Ram full-size pickup boomed.

Armed with more than $10 billion in cash back then, the automaker modernized, putting up the $1 billion Indiana Transmission Plant No. 1, followed shortly by Indiana Transmission Plant No. 2, to join the original Kokomo Transmission Plant and Kokomo Casting.

The expansion reflected the Chrysler leaders' aim: Win 16 percent of the auto market, up from 13 percent. But the $36 billion Daimler merger in 1998 set Chrysler on a distracting ride that drained cash and stymied innovation.

Slashing 26,000 jobs worldwide early this decade and then trying to integrate with Daimler, Chrysler never developed the kind of high-mileage hybrids and front-wheel-drive autos in demand now.

Long regarded as the nation's No. 3 automaker, Chrysler in May had fallen to No. 5, accounting for 10.7 percent of the new autos sold in the United States, ahead of Nissan's 7.2 percent but trailing Honda's 12 percent, Ford's 14.7 percent, Toyota's 18.4 percent and GM's 19.1 percent.

"I doubt the Indiana plants are going to go away,'' said auto analyst Paul Lacy, who studies powertrain developments for market researcher Global Insight's Detroit-area office.

What Chrysler appears intent on doing is bringing in more fuel-efficient designs, Lacy said, such as the automatic six-speed expected to go into production in coming years at Kokomo Transmission Plant. Both of the newer plants already make fuel-efficient models.

Also helping Kokomo are the Linamar and Nissan deals. Linamar's Chrysler Kokomo workers could make parts for Chrysler rivals and supply companies outside the auto business. The 11,000-employee company, based in Guelph, Ontario, makes transmission gears, torque converters, pinions, cases, housings and axles and has expanded in the material handling business.

Earlier this year, Linamar bought a Volvo unit that produces forklifts designed for running on rough terrain, adding it to companion businesses bought in 2007 -- Canada's Carelift Equipment and a Ford company in Mexico that makes power units.

In the Nissan deal, UAW officials say the move will help bring work to the Kokomo plant. Chrysler will ship Nissan dealers a full-size truck beginning in 2010.

Badged as a Nissan, the pickup will contain a Chrysler transmission, Saenz said. Separately, engine maker Cummins, already the diesel supplier on the Dodge Ram, is equipping its main engine plant in Columbus to make diesels for Nissan.

While the Nissan and Linamar deals can help bring production orders into Chrysler plants, Cole, at the Michigan think tank, said a full-fledged merger with an automaker such as Nissan appears likely.

"Partnering makes sense,'' Cole said. "In the next two or three years, they have to get profitable before their cash runs out.''

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