HONG KONG, Oct. 3 — DaimlerChrysler has reached a broad understanding with Chery Automobile of China to set up a joint venture to export cars to the United States for the first time, according to two auto industry managers.þþWhile some details of the joint venture are still being worked out — no timelines or prices were disclosed — the two companies have begun negotiating with suppliers of auto parts to the assembly line, these people said on the condition that they not be further identified because confidential negotiations were continuing. þþThe assembly line, to be in Chery’s headquarters city of Wuhu, in Anhui Province in east-central China, will produce a subcompact car slightly smaller and cheaper than the Dodge Neon, which was sold in the United States for about $14,000 until it was discontinued at the end of the 2005 model year. þþThe timeline depends on how quickly DaimlerChrysler and Chery can set up the assembly line and raise the quality to DaimlerChrysler’s standards. Though American companies, including Chrysler, have been making cars through joint ventures in China for years, those cars have been sold domestically only.þþIndeed, this venture could start by selling small numbers of cars in China before any significant exports begin to the United States. þþThe arrival of Chinese-made cars at American ports is likely to upset the United Automobile Workers union, which has been deeply concerned about job losses as Detroit-based manufacturers lose market share to the nonunion American operations of Asian and European companies.þþDieter Zetsche, the chairman of DaimlerChrysler, said at the official opening of a Beijing factory on Sept. 15 that his company was in talks with automakers in China and elsewhere about building small cars for the North American market but that no agreement had been completed. þþThe spokesman for DaimlerChrysler’s operations in China, Trevor Hale, said on Tuesday that Mr. Zetsche’s Beijing comments remained the company’s position and that he could not elaborate on them.þþChery’s offices were closed Tuesday for China’s weeklong celebration of the founding of the People’s Republic on Oct. 1, 1949, and Chery officials could not be reached for comment. þþRumors of a DaimlerChrysler deal with Chery were flying thick and fast at the Paris auto show last week and have been showing up in the Chinese news media as well.þþThe selection of Chery represents a setback for DaimlerChrysler’s main Chinese partner until now, Beijing Automotive. Daimler and Beijing Automotive have built Jeeps for the Chinese market and are now starting to jointly build Mercedes, Chrysler and Mitsubishi models for sale in China as well.þþYale Zhang, the greater China vehicles forecast director at CSM Worldwide, a big automotive consulting company, said cooperation between DaimlerChrysler and Chery would make sense.þþ“I think that’s a good deal to help Chery improve quality and help Chrysler have a small car,” he said. With its heavy reliance on sport utility vehicles, minivans and pickup trucks in the American market, Chrysler has been hit hard by high gasoline prices and has been looking for a small car to sell.þþBuilding and exporting a small car from Wuhu to the United States will be a challenging exercise in logistics. The city is on a navigable section of the Yangtze River, about 150 miles west of Shanghai and well downstream from the Three Gorges Dam. Car-carrying vessels tend to have very shallow drafts — Honda has been able to bring such vessels up the shallow Pearl River to Guangzhou to load hatchbacks for the European market — but many vessels that commonly carry auto parts have deeper drafts and cannot easily navigate the Pearl or the Yangtze.þþThe state-owned Chery already has a factory in Wuhu that makes 300,000 cars a year and will complete a separate, similar-size plant across the street from it early next year; it was not immediately clear on Tuesday whether cars bound for the United States would be assembled at the factory nearing completion or at another factory to be built in the vicinity. Chery also has ambitions to sell cars with its own brand in the United States and has a distribution agreement with Malcolm Bricklin, an entrepreneur who has specialized in bringing low-cost cars to the American market. þþMr. Zetsche said in Beijing that the company could not manufacture small cars competitively in North America for the domestic market.þþ
Source: NY Times
