DEALTALK-Hyundai has eyed truck and Chrysler tie-up-sources

(For more Reuters DEALTALKS, click [DEALTALK/])

* Hyundai eyes truck to become full-line automaker-sources

* Hyundai approached Chrysler over Ram tieup-sources

* Marchionne rejected initial approach-sources

By Soyoung Kim and Kim Yeon-hee

DETROIT/SEOUL, May 11 (BestGrowthStock) – Hyundai Motor Co
(005380.KS: ) has floated plans to enter the high-stakes U.S.
pickup truck market and proposed a partnership with Chrysler
Group LLC, three people with knowledge of the process said.

As one option, Hyundai made a proposal to Chrysler earlier
this year under which the U.S. automaker would build a truck
for Hyundai based on Chrysler’s Ram truck platform, according
to two of the sources.

Such a tie-up would take the place of a now-scuttled
alliance between Chrysler and Nissan Motor Co Ltd (7201.T: ) and
could allow Chrysler to expand production and reduce costs for
Ram, the No. 3 ranking pickup truck brand by sales.

Chrysler Chief Executive Sergio Marchionne rebuffed
Hyundai’s initial approach in February, according to the
sources, saying the automaker needs to focus on its established
turnaround plans under Fiat SpA (FIA.MI: ).

But Hyundai continues to look at truck options and could
come back to Chrysler, according to two of those with knowledge
of the talks, who were not authorized to discuss the matter
because the closed-door discussions were preliminary.

“We never say never; however, at this stage, pickup trucks
are not high on our priority list,” Hyundai Motor America
spokesman Dan Bedore said.

Chrysler spokesman Gualberto Ranieri had no comment.

The quiet contacts between Hyundai and Chrysler this year
underscore both the growth ambitions of the South Korean
automaker and the nagging doubts over whether Chrysler will
undergo a further transformation a year after its restructuring
in a U.S.-government funded bankruptcy proceeding, analysts

For Hyundai, entering the U.S. pickup truck market would
mean a bet on a high-margin but fiercely competitive segment
where both Nissan and Toyota Motor Corp (7203.T: ) have failed to
break the dominance of Detroit automakers.

Around the time that it made its pitch to Chrysler, Hyundai
also showed a focus group in California a picture of a
Ram-derived truck with a Hyundai badge to judge the reaction of
potential customers, according to one of the sources.

Hyundai executives have also had meetings with
representatives of its 800 U.S. dealers in recent months at
which the topic of an expanded product offering — including a
potential Hyundai pickup truck — was discussed, a person who
joined those meetings said.

Dealers were enthusiastic in their support of a
competitively priced pickup truck, the person said. It was not
clear how consumers reacted.


The long-running success of Ford Motor Co’s (F.N: ) F-series
truck — America’s top-selling vehicle — shows that Hyundai
cannot walk away from the U.S. truck market, said Park
Sang-won, analyst at Eugene Investment & Securities in Seoul.

“From Hyundai’s perspective, it could make use of
Chrysler’s idle capacity, instead of putting in its own money
from the beginning. That would be a win-win strategy for both
Hyundai and Chrysler,” he said.

While sales of full-size pickup trucks have taken a hit in
recent years, the market still represents almost 11 percent of
overall light vehicle sales and is expected to recover as a
recovery in U.S. housing construction gathers pace.

In addition, pickups remain a lucrative stronghold for
Detroit automakers, including Chrysler. Sales of a new
heavy-duty Ram helped Chrysler surprise analysts by posting a
first-quarter operating profit, Marchionne told analysts on

Some analysts have said Marchionne’s Chrysler plans could
evolve and have questioned how it could continue to support all
four of its brands — Chrysler, Dodge, Jeep and Ram — at less
than 10 percent U.S. market share.

“We remain unconvinced Chrysler will survive in its current
form despite Marchionne’s blood, sweat and tears,” Bernstein
Research analyst Max Warburton said in an April report.

“A slimming down of Chrysler to be just Ram, Jeep and a
U.S. production base for Fiat looks a realistic exit strategy
to us,” he said.

Hyundai would benefit from hitching itself to a known truck
brand rather than trying to go toe-to-toe with a new offering
against segment leaders Ford, General Motors Co [GM.UL] and
Chrysler, IHS Global Insight analyst George Magliano said.

That would allow Hyundai to avoid the missteps Toyota and
Nissan made, he said.

U.S. pickup truck buyers, many of whom use the vehicles for
work, are known for being fiercely loyal to their favored
brands. Despite a high-profile push with its Tundra, Toyota
still sold only one-fifth the number of full-size pickup trucks
last year that GM and Ford sold.

“They won’t get into the truck business the way that Nissan
or Toyota did,” Magliano said of Nissan. “How many times has
Toyota gone through the truck effort and they are still not

In 2008, Chrysler and Nissan unveiled a production alliance
under which Nissan was expected to build a small car for
Chrysler and Chrysler would build a Ram-based pickup for

That deal unraveled last year after Fiat moved to take
control of Chrysler.

Hyundai and Chrysler were partners in a Michigan-based
engine plant joint venture before Fiat took control. In
addition, Hyundai had been one of the automakers Chrysler’s
former owner, Cerberus Capital Management, had approached about
potential partnerships in 2008 and early 2009, according to
Chrysler executives at the time.

Stock Investing

(Additional reporting by Kevin Krolicki and Bernie Woodall in
Detroit, editing by Gerald E. McCormick)

DEALTALK-Hyundai has eyed truck and Chrysler tie-up-sources