The discussions, which began about a month ago, may allow the two automakers to share platform designs and reduce development costs, the people, who asked not to be identified, told Bloomberg News. The talks include possible cooperation on a large sport utility vehicle, one of the people reportedly said.
Chrysler parent company DaimlerChrysler said on Wednesday that it was considering all options for its US unit which industry observers said left open the possibility of unwinding the merger that formed the company in 1998.
Speculation has raged in the US media ever since, with numerous analysts and commentators putting the case for and against a Chrysler de-merger to re-establish the company as a stand-alone automaker, or an alliance or merger with a rival automaker, or technical tie-ups.
“GM has a lot Chrysler could gain from because they have the more modern technology,” Global Insight analyst John Wolkonowicz told Bloomberg News, adding: “I see GM as the stronger partner in any discussions.”
JPMorgan Securities analyst Himanshu Patel said in a note to investors that “a potential alliance between the two car makers could be sensible if it is focused in selected product or technology areas”, according to Bloomberg News, which added that the two automakers themselves declined to comment.
The Detroit Free Press (DFP) quoted both Patel and fellow JP Morgan analysts Ranjit Unnithan as writing: “A sweeping alliance between the two (Renault-Nissan style), however, would seem to benefit Chrysler much more than GM given GM’s” size: twice as big as Chrysler in the United States and three times as big worldwide.
“Without an ‘equalizing payment’ (to GM), we suspect GM would reject such a sweeping alliance on the argument that the potential synergies would be largely skewed towards Chrysler (as it did with Renault-Nissan alliance proposal)”, the analysts reportedly wrote.
According to the DFP, they suggested another way: the unions might give significant concessions on health care and headcount, because they fear the prospect of Chrysler being purchased by a private investor.
“The lure of such a deal could be a strong incentive (for the union) to agree to a Goodyear-style health care deal for the Big Three carmakers,” they wrote, according to the paper.
The Goodyear deal the analysts referred to came after a three-month strike at the tyre maker when a new contract was agreed with unions and healthcare liabilities were transferred to an independent trust fund.
The Detroit Free Press noted that GM chief executive officer Rick Wagoner last month said the automaker was studying the Goodyear contract with the United Steelworkers of America.