GM, Chrysler Will Form Venture to Make Parts : First Such Deal in History of U.S. Auto Industry Will Produce Transmissions for Both Companies

In an unprecedented action, General Motors and Chrysler said Thursday that they have agreed to form a joint venture that will build transmissions and other auto parts for both companies.

The action marks the first time that two of the nation’s Big Three auto companies have merged any of their manufacturing operations. For Chrysler, the venture will provide extra parts-making capacity; for GM, it will provide extra production for a plant that is under-used.

GM, Ford and Chrysler have formed joint ventures with foreign auto companies and frequently buy parts from each other. But Detroit’s Big Three have previously shied away from joint operations among themselves, in large part because of concerns that their actions would prompt an antitrust investigation by the federal government.

But antitrust concerns in the auto industry have eased, thanks to the onslaught of imports; the Big Three no longer have the power to control the car market.

A new federal law allowing domestic competitors to share basic research work has also helped pave the way for closer cooperation in Detroit. GM, Ford and Chrysler have already established a joint research consortium to speed the development of lightweight composite materials that could be used in cars in place of steel. That effort has brought together engineers from all of the Big Three for the first time.

Chrysler, through its Acustar parts unit, will control the new joint venture with a 64% stake, and GM will hold the remaining 36%. The venture has not been named, and its management staff, board and headquarters site have yet to be selected. But GM and Chrysler said they expect the venture to be in operation as early as January.

GM and Chrysler officials said the joint venture will use GM and Chrysler plants that now make transmissions and related components.

Chrysler will contribute its Syracuse, N.Y. , New Process Gear facility, which makes manual transmissions as well as transfer cases, which are key parts in transmissions.

GM will turn over its Muncie, Ind., Hydramatic division plant, which produces three types of manual transmissions for cars and trucks.

Chrysler’s Syracuse plant employs 2,700, while GM’s Muncie factory has 1,400 workers.

Officials said that under the joint venture, manual transmission production now handled in Syracuse is likely to shift to Muncie, freeing up space in the Syracuse plant for additional transfer case production, which Chrysler needs. The Muncie facility now works exclusively for GM, and the additional Chrysler transmission production will diversify the plant’s operations.

The deal means “greater job security for both locations,” said Chrysler Vice Chairman Gerald Greenwald.

“The benefits go well beyond the additional business available,” to Muncie, added GM President Robert Stempel. “It means we’re able to retain and utilize the skilled teams of transmission specialists who have served so well at Muncie.”

Both companies said they have already notified the Justice Department about their plans and are awaiting governmental approval. Officials at Ford, who were left out of the deal, on Thursday would say only that they were “looking at it with a great deal of interest.”