By Chang-Ran Kim, Asia autos correspondent
TOKYO (Reuters) - Nissan <7201.T> and RENAULT (RNO.PA)
Chrysler, held 80 percent by Cerberus Capital Management LP
As a backstop, Cerberus is also talking to other automakers, including Renault SA, sources have said, while one newspaper has said Nissan Motor Co has proposed to buy about 20 percent of Chrysler.
But with Renault denying the talks, Nissan refusing to comment and conflicting reports making the rounds, analysts are not convinced of an imminent deal, and say it would be a bad idea anyway.
"Nissan and Chrysler already have joint product-based projects in the pipeline, and extending those wouldn't require an equity tie-up," UBS auto analyst Tatsuo Yoshida said.
"If Chrysler became part of the alliance, Nissan and Renault would have to dedicate a lot of human and other resources to fixing the company -- resources they don't have," Yoshida said.
Renault owns 44 percent of Nissan, while Nissan owns 15 percent of France's No.2 automaker.
ELUSIVE
Although there could be some benefits for the French manufacturer from a deal, these remain more elusive than for Nissan and Chrysler.
"I can see the industrial logic, particularly between Nissan and Chrysler - less so for Renault as they are not in North America, so it would be about indirect economies of scale," said Nomura International analyst Michael Tyndall.
A deal between the three manufacturers might also give the alliance access to funding the U.S. government has pledged to help the industry, Tyndall said, although he noted that it is not yet clear whether a tie-up would disqualify Chrysler itself from these loans.
"The more immediate concern is cashflow," Tyndall said. "It doesn't look as if Nissan would pay cash for a Chrysler stake - a share swap could work. But it raises questions about the dividend stream from Nissan to Renault. In the current market, cash is incredibly important."
Since breaking off the talks with GM two years ago to the month, Nissan and Renault CEO Carlos Ghosn has repeatedly said he remained open to adding a U.S. automaker to complete an alliance spanning the three key continents, on the notion that combining resources and sharing components could yield further cost-savings.
But Ghosn has said that timing was crucial, and the timing now, investors say, couldn't be worse.
"It's hard to see the benefit when the global auto market is slowing down," said Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management. "I'm not sure Nissan can afford to make such a move when we can't see the bottom in the global auto market."
During its talks with GM in late 2006, Nissan needed more capacity to meet U.S. demand, its profits were bigger and global car sales were on a steady climb.
Now, Japan's No.3 car maker is poised for a third consecutive fall in annual profits as global demand crumbles -- most notably in the United States, where Chrysler sells the majority of its Chrysler, Dodge and Jeep models.
U.S. auto sales have dropped to 15-year lows, battered first by a housing slump and higher gasoline prices and more recently by tighter consumer credit and recession fears.
"Chrysler is in such a bad state right now, tying up with such a company would be meaningless," Credit Suisse analyst Koji Endo said.
"There would be the option of selling (Nissan-branded) pickups and sport utility vehicles at Chrysler's dealers, but you wouldn't need a merger for that. In any case, their dealers are all independent, so (Nissan) could just ask each one of them to become Nissan dealers instead, if that's what they wanted."
Over the past year, Nissan and Chrysler have sealed three deals to supply vehicles to each other on an original equipment manufacturing (OEM) basis. Project-based alliances have become a popular method of saving development costs among automakers, without the complexities of a capital alliance such as the failed Daimler-Chrysler merger.
While GM's interest in Chrysler is seen as an attempt to tap the latter's cash -- estimated at $11.7 billion at the end of June -- industry watchers also see that union as a disaster for GM.
(Additional reporting by Nobuhiro Kubo and Helen Massy-Beresford in Paris; Editing by Lincoln Feast and Marcel Michelson)
