DaimlerChrysler Secures Joint Project Deal with Mitsubishi

A separate report, seen in Automotive News, states that DCX has agreed with Mitsubishi to continue all current joint car development projects.

Currently Mitsubishi owns 100 percent of the factory that builds the Colt and the smart forfour. (Photo: Mitsubishi Motors North America)

"All the significant and well-known projects in the car field will continue as before," a spokesman stated.

Not all negotiations are final, however, as discussion is still continuing on the size of equity stakes in the Dutch manufacturing facility NedCar, which makes the smart forfour and Mitsubishi Colt. Currently Mitsubishi owns 100 percent of the factory, but DaimlerChrysler is said to be expecting a stake in the facility too.

With the Colt in mind, some analysts consider the subcompact model to be a smarter move for the North American market than the proposed sport truck. The pickup is a risky venture for Mitsubishi, as most buyers in this market don't turn to Japanese retailers, but tend to stick with the traditional big three. Furthermore, Mitsubishi is considering a styling direction that is completely non-traditional, which either could be a major success or a big flop, depending on the whims of new pickup truck buyers. While Chrysler has made major inroads with make it or break it new models, Mitsubishi does not have the financial backbone to withstand a slow seller. For this reason there is concern over the brand's next-generation Eclipse coupe and convertible. While the Eclipse has traditionally done well in its segment the sports car market is currently weak, prompting Toyota to announce it is pulling out of it altogether by the end of 2005.

Mitsubishi is considering a styling direction for its sport truck that is completely non-traditional, which either could be a major success or a big flop. (Photo: Mitsubishi Motors North America)

This leaves questions as to the wisdom of Mitsubishi investing in this segment in its current financial state. It could use a subcompact in North America more, to battle the Koreans, including Hyundai's Accent and Kia's Rio, Toyota, which is very successful with its Echo and Yaris-derived Canada-only Echo Hatchback, and Chevrolet that now sells the Daewoo-derived Aveo. Also, small car buyers are traditionally first-time new car owners and therefore younger, exactly the demographic that should be less aware, and if up on the news, less concerned over the brand's stability in the market. It is also entirely possible that Dodge will consider branding a version of the Colt for the North American market, a strategy the domestic brand used previously to lure in entry-level buyers.