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Chrysler first to sell Chinese cars in US

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Chery-Chrysler deal to get OK
American automaker is expected to become the first to build Chinese autos for U.S. market
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Rick Blanchard | Link to Original Article @ The Detroit News

  • DaimlerChrysler AG and Chery Automobile Co. struck a deal on Dec. 30 making Chrysler the first major carmaker to confirm plans to sell Chinese-built cars in the United States.
  • Chery is expected to produce a subcompact for Chrysler that will likely be sold in the United States under the Dodge brand in 2009.
  • Chery, based in Wuhu in Anhui province, is one of China's fastest-growing automakers and sold 50,000 vehicles abroad in 2006.
  • State-owned Chery previously considered exporting vehicles to the United States in a venture with American entrepreneur Malcolm Bricklin. It has an agreement to produce engines for Italy's Fiat Auto.
  • The Chery-Chrysler deal is expected to get the final go-ahead from the Chinese government today.

The Chrysler Group's groundbreaking deal with China's Chery Automobile Co. to build small cars for the United States and other markets is expected to get the final green light today, according to people familiar with the plan.

The agreement appeared to be in doubt after DaimlerChrysler AG announced May 14 it planned to sell Chrysler to Cerberus Capital Management for $7.4 billion.

But Chrysler and Chery worked through the issues and Chrysler CEO Tom LaSorda is in China finalizing the agreement.

The final agreement is expected to be announced at 10 p.m. Detroit time today in Beijing, according to a person familiar with the deal.

Chery said Monday it will sign a strategic cooperation agreement with Chrysler today. The company would not comment beyond the statement. Chrysler officials could not be reached for comment late Monday.

Chrysler signed a letter of intent with Chery in December, under which the Chinese automaker would build subcompact cars to be sold by Chrysler in the U.S., Western Europe and other markets around the world. That deal has been pending approval from the Chinese government.

The Auburn Hills-based automaker has said it plans to source more parts and vehicles in emerging markets as part of its plans to return to profitability after losing money last year and in the first quarter of this year. Chrysler's deal with Chery could mark the first time Chinese-made cars will be sold in the U.S. by an American car company.

Cerberus' purchase of Chrysler is expected to be finalized later this month or early next.

Chrysler is counting on international partnerships to develop a global presence.

The Chery deal was considered a breakthrough for Chrysler, which was searching for a low-cost partner to build and supply subcompacts.

The smallest car in Chrysler's lineup is the Dodge Caliber, and it has nothing in the subcompact segment to compete against the Honda Fit, Toyota Yaris and Korean-built Chevrolet Aveo.

In announcing the initial talks with Chery, Chrysler's LaSorda was emphatic about gaining subcompact presence in the U.S. market. "Every other automaker is importing B-segment cars into the U.S. market -- except Chrysler Group," LaSorda said. "We've got to get into play here."

Chrysler also has taken steps to reduce its reliance on the North American market, setting up production in China and introducing the Dodge brand in Europe.

In the first four months of the year, Chrysler Group vehicle sales outside of North America rose 14 percent to 70,859 vehicles, but that accounts for less than 10 percent of its total sales.

Chery had previously considered producing cars for export to the United States in a venture with entrepreneur Malcolm Bricklin, but that deal unraveled.

With sales of about 80,000 vehicles last year, Chery is China's eighth-largest automaker, competing with major multinational leaders such as Volkswagen and General Motors Corp.

Chery gained notoriety in 2003 when GM accused it of copying one of its vehicles, the Chevrolet Spark, a hatchback based on GM's Daewoo Matiz. Chery now produces at least seven models, including the subcompact QQ, the Tiggo, A5 and V5, Windcloud, Flagcloud, Oriental Son and Armoured Oriental Son, says its Web site.

Industry executives and analysts say talks with the Chinese tend to be protracted under the best and clearest of circumstances.

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Wow, so Chrysler's going to go down again?

WHY would they do this? I mean, don't they have experts working for them who says what is and isn't a good move? All I know about Chinese cars is: Poor quality and knock-offs of other designs.

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If Chery just builds the car that Chrysler specs out for them, I don't really see why it would be so inferior. The Chinese firms just can't seem to design their own cars yet.

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While the smaller Chinese companies, and especially SUV and pickup manufacturers, have been producing knock-offs based on decades-old Japanese designs, the larger and better-funded Chinese automakers have been spending what must be billions of dollars hiring the major European design and engineering firms to produce their own new models—Pininfarina, Italdesign, Porsche, Ricardo, AVL, FEV etc. have all been involved in designing the new generation of Chinese vehicles. Chery for one has had an enormous engine and transmission development program, larger than almost every Japanese, European and American automaker combined (they had to practically start from scratch after all). Hence the deal to supply Fiat, at least in the short term, who had been depending on GM and neglected gasoline engine development.

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Wow, so Chrysler's going to go down again?

All I know about Chinese cars is: Poor quality and knock-offs of other designs.

No need to worry! It's not like cars are something complicated like toot paste or dog food.

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When it's just a Chinese company by themselves, they produce crap.

When they are being monitored and supervised by a North American/European company, and held to the same standards... they make some good stuff.

I will bet Ten Dollars that this car will be superior to the Dodge Caliber and Dodge Avenger in build quality, refinement, and general 'unsuckiness'.

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