UPDATE 2-Chrysler signs small-car deal with China's Chery http://today.reuters.com/news/articleinvesting.aspx?type=companyNews&storyid=152456+29-Dec-2006+RTRS&WTmodLoc=BizArt-L1-CompanyNews-2
Fri Dec 29, 2006
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By Kevin Krolicki
DETROIT, Dec 29 (Reuters) - Chrysler has signed a pioneering deal with China's Chery Automobile Co. to produce a new small car that would be made in China and marketed around the world, Chrysler said on Friday. Chrysler Chief Executive Tom LaSorda signed the preliminary deal with Chery representatives several weeks ago, Chrysler spokesman Jason Vines said.
The deal must still be approved by the Chinese government and the supervisory board of Chrysler's corporate parent, DaimlerChrysler AG (DCXGn.DE: Quote, Profile , Research) (DCX.N: Quote, Profile , Research), which meets next in January, Vines said.
If the long-anticipated partnership is approved by both sides, it would mark a major advance toward China's goal of taking exports from its fast-growing auto industry into the developed markets, including the United States. Chrysler began seeking a partner to make a new subcompact that would be marketed in the United States and other markets earlier this year.
The automaker said it needed to find a partner because of the costs of designing, making and marketing a car in a segment of the market where margins are already narrow and consumers expect a low sticker price.
Chrysler showed off a small car concept earlier this year, called the Dodge Hornet, which is expected to show the design direction for the new small car.
Vines said Chrysler would not comment on the expected time table for production or other details of the pending joint venture, except to say that the new car would carry one of the Chrysler car brands.
The Hornet, a two-door hatchback, is smaller than the Dodge Caliber, the smallest vehicle in Chrysler's current line-up.
The subcompact segment represented just 1 percent of the overall U.S. vehicle market in 2005, but growth in the segment has been fast because of increasing concern over gas prices.
Auto entrepreneur Malcolm Bricklin had been negotiating with Chery on a deal to bring Chinese-made cars to the U.S. market. But talks between Bricklin's company, Visionary Vehicles, and Chery broke off last fall.
Bricklin had initially proposed a joint venture to develop and sell Chery-made cars in the United States by 2007, but many industry analysts had questioned whether the Chinese automaker would be ready to meet quality and safety standards that soon.
Chery, a medium-sized but fast-growing automaker in the eastern city of Wuhu, already exports its own branded vehicles to roughly 20 countries, mostly developing nations in Southeast Asia, Africa and the Middle East. A Chery representative was not immediately available to comment on the deal with Chrysler.
Malaysian carmaker Proton Holdings Bhd (PROT.KL: Quote, Profile , Research), a state-controlled company, has also been in partnership talks with Chery to consider a joint car assembly operation.
Proton said earlier this month that those partnership talks had been extended through February.
Shares of DaimlerChrysler were unchanged at $61.79 in afternoon trade on the New York Stock Exchange. The stock has gained 21 percent this year.
(Reporting by Kevin Krolicki, editing by John Wallace; Reuters Messaging: kevin.krolicki at reuters.com@reuters.net; 1-313-967-1902))
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