Chrysler in talks with automakers on tie-ups

SOURCE:

Reuters

2008-08-13 15:31:36

TRAVERSE CITY, Michigan (Reuters) –

Chrysler LLC has talked

with automakers in Russia and India about potential tie-ups and

was approached by Fiat about a partnership, although no formal

discussions are ongoing, a senior Chrysler executive said on

Wednesday.

Chrysler, the No. 3 U.S.-based automaker, is also planning

a new car-based SUV that will hit showrooms in 2010, and has

identified over $1 billion in non-earning assets it will sell

to raise cash as it tries to turn around its operations.

Chrysler Vice Chairman and President Tom Lasorda said the

automaker is moving ahead with plans to forge alliances,

especially in emerging markets.

“When we look at alliances in different regions, we have

had discussions with multiple companies in Russia,” LaSorda

said on the sidelines of an industry event. “In India we have

had discussions with many companies.”

LaSorda, who declined to name the companies, said the

automaker may decide on a Russian partner by the end of 2009.

Chrysler was approached by Fiat SpA (FIA.MI), the Italian

automaker, for a potential partnership, he said.

“Have they approached us? Yes,” he told reporters,

referring to Fiat. “At this stage there is no formal discussion

going on, but there was an inquiry.”

Fiat Chief Executive Sergio Marchionne, credited with

turning around the Alfa Romeo, Lancia and Fiat brands, has said

Fiat is looking for a partner for its return to the North

American market.

Sources said last month Chrysler was in talks with Fiat

about leasing manufacturing capacity and sharing retail

distribution, which would allow Fiat to return to the U.S.

market for the first time in 25 years.

Chrysler is also in discussions with India’s Tata Motors

Ltd (TAMO.BO) about selling its Jeep Wrangler SUV in India and

possibly other Asian markets, according to sources.

LaSorda said Chrysler’s owner, Cerberus Capital Management

LP (CBS.UL), was committed to “holding on” to the automaker for

the long term as it seeks tie-ups amid a steep decline in U.S.

auto sales.

Detroit automakers have been hit hard by a dramatic shift

in buying to passenger cars and fuel-efficient car-based SUVs,

forcing them to restructure.

Chrysler’s U.S. sales have declined 23 percent through the

first seven months of the year.

NEW CROSSOVER SUV

Chrysler plans to invest about $1.8 billion over the next

two years to retool and expand its Jefferson North assembly

plant in Detroit that builds the Jeep Grand Cherokee, a

truck-based SUV.

The new car-based SUV will retain the Grand Cherokee name,

LaSorda said.

U.S. sales of Grand Cherokee are down 32 percent year to

date as Americans shun gas-thirsty large vehicles amid record

high gas prices.

Chrysler also expects to finalize design plans for the new

small car being built for the automaker by Nissan Motor Co

(7201.T)(NSANY.O) within the next couple months.

The global small car, which will be built in Japan, is on

track to be sold in 2010, LaSorda said.

Chrysler, acquired by Cerberus a year ago, has faced

scrutiny over whether it can ride out a downturn in U.S. auto

sales that many analysts expect to stretch through 2009.

The automaker plans to raise cash by selling non-earning

assets such as land and office space.

“One advantage of private ownership is that we can sell

non-earning assets to generate cash,” LaSorda said. “To date,

we have identified over $1 billion in assets, and we are more

than half way to achieving that goal.”

The automaker has sold over $500 million in assets,

including land around its headquarters in Auburn Hills,

Michigan, and its Tritec engine plant in Brazil, according to

LaSorda.

As a private company, Chrysler can focus on cash and not

worry about recording write-downs for any loss in the book

value of the asset being sold, LaSorda said.

He also said the automaker is meeting or exceeding its

financial targets.

Chrysler ended June with $11.7 billion in cash, and had

earnings of $1.1 billion before interest, taxes, depreciation

and amortization in the first half of the year.

(Editing by Gerald E. McCormick, Derek Caney and Jeffrey

Benkoe)

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