Chrysler Plans a Joint Venture With Renault

Chrysler, aggressively seeking to expand its international ties, announced plans Thursday to work with Renault, the French auto maker, to jointly produce a new compact utility vehicle to be built and sold both in the United States and Europe.

It was the second major link-up with a foreign auto maker that Chrysler has announced this week. On Tuesday, the No. 3 U.S. auto maker said Hyundai, the South Korean auto maker, has agreed to produce a new line of mid-size cars for Chrysler in Hyundai’s new Canadian assembly plant beginning in 1991.

The announcement Thursday of the $500-million Renault deal came as Chrysler announced that its fourth-quarter earnings rose to $433.6 million, up 23.8% from the year before. But weak performances in earlier quarters led full-year net income to fall 18.6% to $1.05 billion, down from $1.29 billion in 1987.

Chrysler’s decline in annual earnings underscores a trend that increasingly worries Chrysler executives. They have acknowledged that most of Chrysler’s earnings are now coming from its Jeep utility vehicles and popular mini-vans; the company’s passenger cars are contributing little to the bottom line.

Expect Industry Mark

In part, that is because much of Chrysler’s car lineup is concentrated in the fiercely competitive subcompact and mid-size segments, where Chrysler has been forced to offer steep rebates to compete with imports. General Motors and Ford, in contrast, are reaping huge returns from their more extensive offerings of full-size and luxury cars.

Yet despite Chrysler’s earnings decline, analysts believe that the Big Three will still set a record for total annual profits in 1988. GM and Ford have not yet reported their earnings for the year, but GM Chairman Roger B. Smith has already revealed that GM’s 1988 profit set a record for the company.

Meanwhile, with the Renault deal, Chrysler is building on a link with the French auto maker that it inherited when it acquired American Motors in 1987. When Renault, which had working control of AMC, sold its 46.1% stake in the struggling auto maker to Chrysler, Chrysler became Renault’s North American distributor, and the two agreed to work together on future projects.

But Chrysler quickly phased the poorly received Renault-built cars out of its lineup, and until Thursday’s announcement, the Chrysler-Renault relationship seemed to be withering.

Building ‘Global Motors’

But the new project not only expands their ties, but also gets Chrysler back into the European market in a big way for the first time since the 1970s.

Additionally, the move seems to be one further step in Chairman Lee A. Iacocca’s long-range efforts to transform Chrysler into what he has often called “Global Motors”--an American company with close engineering and production ties to auto makers in both Asia and Europe.

Iacocca said Thursday that production of the small Jeep-type vehicles, through a 50-50 joint venture, would begin at a Chrysler plant in the United States and a second facility in either Portugal or Spain by 1992. Chrysler will handle North American sales of the vehicles, while Renault will distribute them in Europe, he added.