STUTTGART - DaimlerChrysler will buy out Ford Motor Co.'s half interest in NedCar and build a four-seat Smart model there starting in 2004.
The new Smart will be based on a Mitsubishi minicar platform now under development.
The joint venture in Born, the Netherlands, began as a Mitsubishi-Volvo 50-50 partnership in 1995. But NedCar's future has been in doubt since Ford acquired Volvo in February 1999.
DaimlerChrysler and Mitsubishi Motors Corp. last month signed a letter of intent for DCX to buy a controlling 34 percent of Mitsubishi.
The alliance puts an end to negotiations between DaimlerChrysler and PSA/Peugeot-Citroen about supplying components for future Smart models, said DCX Chairman Jürgen Schrempp.
'We were very lucky that Mitsubishi was very far along with developing engines and gearboxes for a new minicar, but not so far that we could not have joined the project,' Schrempp said.
'Our engineers will immediately meet and discuss all possibilities and join forces in developing a new family of small cars.'
Both Smart and Mitsubishi-branded versions will be produced at NedCar. There will be no Chrysler version, Schrempp said.
DCX's Smart plant in Hambach, France, will be used exclusively for the two-seat Smart and future derivatives. But Schrempp expects the next generation two-seat Smart to benefit from economies of scale by sharing parts with the four-seater and its Mitsubishi minicar sibling.
The Volvo S40 and V40 models built at NedCar share a platform with Mitsubishi's Carisma. In an interview last month, Ford President Jac Nasser said production of the small Volvos would be moved to another unnamed Volvo plant.
DaimlerChrysler will pay $2 billion for its stake in Mitsubishi. If viewed as one company, the combination would produce the world's third-largest carmaker.
The two companies together would have global production of about 6.5 million vehicles, compared with about 8.9 million for General Motors and 8.2 million for Ford. It would have a market share of 18.2 percent in the USA, 7.7 percent in western Europe, 12.7 percent in Japan, and 9.4 percent in the rest of Asia, according to the two companies.
The deal gives financially troubled Mitsubishi a much-needed cash injection, while DaimlerChrysler gets a sharp boost to its presence in the fast-growing markets of Asia.
Schrempp and Mitsubishi President Katsuhiko Kawasoe both said that the Japanese carmaker would retain its autonomy.
'We have agreed that Mitsubishi Motors Corp. stays, and will stay, an independent company. I personally guarantee and honor those arrangements with Mr. Kawasoe,' Schrempp said.
Kawasoe said there would be no 'executive board' positions for the German company. He said that DCX will take two full-time and one part-time directors' seats on a board that will be scaled back to 10 from the current 36. There will be five directors from Mitsubishi Motors and two from the Mitsubishi Group, he said.
It is not known yet in which departments the two full-time directors will serve, Mitsubishi spokesman Tomoyuki Ohkusa said.
Schrempp dismissed questions about whether he might become frustrated and seek greater control over Mitsubishi if the Japanese company's restructuring plan failed to deliver adequate financial results.
'Mitsubishi will not fail in its program for restructuring. I have absolute confidence in Mitsubishi management,' Schrempp said. 'We're partners now. We're partners in good weather and bad weather.'
However, he pointed out that Chrysler returned from the brink of bankruptcy in the 1980s, and that Daimler-Benz itself had been deeply in the red as recently as 1995, before turning around. That management experience could aid Mitsubishi, Schrempp implied. 'Can you imagine what kind of knowledge and wisdom there is, to handle those sorts of problems,' he asked.
It remains unclear, however, if Mitsubishi will avail itself of DCX's experience if doing so meant taking painful orders from German bosses.
'It's not as if there will be no participation by them in management, Kawasoe said. But it's not as if we are going to be swallowed up by DaimlerChrysler.'