Chrysler Pursued Kia Partnership Before Fiat
06 Mai 2009 - 2:28AM
Dow Jones News
Chrysler LLC reached an initial agreement with Kia Motors Corp.
(000270.SE) about buying a Kia vehicle and selling it as a Dodge, a
Chrysler official said Tuesday - one of several potential alliances
Chrysler explored last year before negotiating a partnership with
Fiat SpA (FIATY).
Scott R. Garberding, Chrysler's chief procurement officer,
testified at a court hearing Tuesday that Kia and the U.S. auto
maker negotiated a term sheet to purchase and modify a vehicle from
Kia.
However, Kia backed out of the deal "late in the game" because
of manufacturing issues, Garberding said.
The potential Kia partnership shows just how dire Chrysler's
situation had become and how far it was willing to go to protect
its survival.
Chrysler relies on the North American market for 90% of its
sales and its product portfolio is dominated by larger vehicles
such as pickup trucks and Jeeps. The combination was bad news for
Chrysler as gas prices surged in the U.S. in early 2008 followed by
a recession.
Chrysler's former vice chairman, Tom LaSorda, spent almost all
of his time visiting most of the global auto makers trying to forge
relationships as slumping sales in the U.S. continued to erode the
auto maker's financial stability.
Chrysler, which sought bankruptcy protection last week, is
planning to sell most of its assets to a new company that will be
owned by Fiat, the United Auto Workers union and the U.S. and
Canadian governments.
A bankruptcy judge on Tuesday is considering rules for selling
the auto maker to Fiat or another bidder, should one emerge.
Last year, Chrysler also explored a joint deal with GAZ and
Magna International Inc. (MGA) to build a vehicle in Russia, using
open capacity at a Gaz assembly plant.
The auto maker also explored larger potential alliances with
Nissan Motor Co. (NSANY), General Motors Co. (GM) and Fiat in the
past year, Garberding said.
The Nissan deal was explored in a 90-day study under a project
named "Go Global," Garberding said. The companies had a
face-to-face meeting on the study in Toyko in February 2008, he
said.
The project looked at the possibility of Chrysler manufacturing
a truck for Nissan and Nissan manufacturing small subcompact cars
for Chrysler, Garberding said. The study also looked at potential
cost savings, including purchasing, procurement and
manufacturing.
The study wrapped up in May 2008, but the value of the deal had
changed "for the most part in the wrong way" as financial
conditions weakened, Garberding said.
The companies explored additional cost synergies, such as
savings through the product and power-train initiatives, but the
discussions didn't result in a deal, Garbering said.
In August, Chrysler initiated discussions with GM, calling the
talks "Project America," Garberding said. There was a series of
negotiations and a deeper information exchange in October, he
said.
However, due diligence stopped after the financial crisis "hit
in full force" around that time, Garberding said.
The Fiat talks began in June 2008 with discussions to build the
Fiat 500 in a Chrysler plant in Mexico, Garberding said. The
companies began talks of a broader alliance in November, he
said.
-By Chad Bray and David McLaughlin, Dow Jones Newswires;
212-227-2017; chad.bray@dowjones.com