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Behind The Wheel

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Nov.10

9:28 AM ET

Monday, 10 Nov 2008

Chrysler Splits Up? The Possible Scenarios If It Happens

Posted By:Phil LeBeau

Topics:Japan | Economy (U.S.) | Economy (Global) | Automobile Industry

Sectors:Automobiles and Parts

Companies:Nissan Motor Co., Ltd. | Hyundai Motor Company | Toyota Motor Corporation | General Motors Corp

CNBC.com

With the end of merger talks between Chrysler and General Motors[GM Loading... () ], there is rampant speculation about what happens next to Chrysler. Sure parent Cerberus Capital would prefer to sell Chrysler as a whole, but the odds of that happening aren't real strong.

And the fact that auto makers around the world are dealing with their own weakened balance sheets means prospective buyers will think twice before taking the plunge. So how might Chrysler be split up?

Nissan/Renault buying Dodge Ram trucks?
Nissan [NSANY Loading... () ]CEO Carlos Ghosn wants an alliance partner in North America, but Cerberus has no interest in owning Chrysler and being "partners" with another auto maker. Might Nissan want Dodge Ram Trucks/SUVs? Strategically, it would make for a natural fit, but would Ghosn want Ram and not Jeep?

Hyundai buys Jeep?
Publicly, the Korean auto maker is downplaying that it has talked with Cerberus about Chrysler. Privately, every auto exec looks at Jeep and salivates at the potential. How great is it? One auto industry insider calls the Jeep Wrangler a model and platform that could be a major money maker around the world.

Volkswagen buy Chrysler minivans?
VW's Routan minivan is built at the same plant as Chrysler's Town and Country minivan, so the natural assumption is VW might want to buy Dodge Caravan and Chrysler Town and Country as well. I'm not so sure about that logic. Sure VW wants greater position in the U.S., but the minivan business is not as lucrative as it once was.

Peugeot buy Chrysler's car business?
The French auto company has long eyed a re-entrance to the U.S., but would it want the weakest part of Chrysler? Sure, you could argue that Peugeot might want the distribution network that comes with Chrysler's dealers, but there's no guarantee those dealers would stick.

Which brings up the one reason these scenarios might not pan out: Chryslers platforms and brands are interconnected. With the exception of Jeep, you can not just peel off one area, like minivans. Auto makers share parts, technology across platforms and line-ups. Those economies of scale are lost as you try to break up the country's fourth largest auto maker.

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