The alliance to produce low-cost vehicles could bring Chinese-made cars to North America.
Published July 5, 2007|Updated Aug. 25, 2007

The next Made-in-China export bound for the United States: cars.

Chrysler Group signed a deal Wednesday with China's biggest automaker, Chery, to launch a low-cost production venture that could export the first Chinese-made cars to the United States.

The first cars will reach Latin America or Eastern Europe within a year, and models should be exported to North America and Western Europe in 2-1/2 years, said Chrysler chief executive Tom LaSorda.

"As part of the Chrysler Group's global transformation, we are finding new ways to bring vehicles to market faster, more efficiently and with less cost," LaSorda said at a signing ceremony.

The alliance offers 10-year-old Chery Automobile Co., based in the eastern Chinese city of Wuhu, an opportunity to realize its longtime ambition of entering the U.S. market.

Beyond Africa

Chinese automakers already export, mostly low-priced trucks and buses shipped to Africa and other developing markets. But analysts say they lack the technology to meet U.S. and European safety and pollution standards on their own.

Chery CEO and chairman Yin Tongyao said the deal will help Chery improve its skills as it tries to expand foreign sales of its own models.

"Chery is still young, so we should learn from Chrysler and improve our own competitive edge in the near future," he said, calling LaSorda "my teacher in the automotive business."

The first Chrysler-Chery export will be based on Chery's A1 compact and sold under the Dodge brand, LaSorda said.

A 1.3-liter version of the A1 retails in China for 53,800 to 59,800 yuan (the equivalent of $7,100 to $7,900). Export prices have not been announced.

The companies will jointly develop future models, probably with Chrysler styling on a Chery platform, LaSorda said.

LaSorda said he had "no concerns at all" about convincing U.S. consumers that Chinese-made cars are safe at a time of warnings about seafood, tires and other goods imported from China. Chrysler will work closely with Chery to ensure the cars meet U.S. and European safety and emissions standards, he said.

The agreement follows DaimlerChrysler AG's agreement in May to sell 80.1 percent of money-losing Chrysler to U.S. private-equity group Cerberus Capital Management, freeing the parent company to focus on its truck and Mercedes luxury car lines.

Major automakers have been aggressively expanding production in China, which overtook Japan last year to become the world's No. 2 vehicle market after the United States. But until now, most have focused on meeting red-hot local demand, which has made China a bright spot for U.S. automakers amid lackluster sales at home.

Easier said than done

Others also have announced plans to export Chinese-made cars to the United States, but none has yet made it to market.

A Chinese automaker, Changfeng Motor Co., said in January that it hoped to sell sport utility vehicles in the United States within two years, but it has given no details. Chery had a deal with American entrepreneur Malcolm Bricklin to sell cars in the U.S. market, but that fell through.

Japan's Honda Motor Co. has exported Chinese-built Jazz subcompacts to Europe since 2005.

Chrysler's top pick

Last year, Chery reported sales of about 310,000 cars, with 40,000 of those exported. Its target this year is 390,000 cars, including 70,000 units sold abroad.

The company assembles vehicles with partners in Iran, Malaysia, Russia, Ukraine, Brazil and Egypt. It announced plans in March to open a factory in Uruguay - its first in Latin America - with an Argentine partner.

Total Chinese passenger car sales rose 37 percent last year to 3.8-million, while total vehicle sales rose 25.1 percent to 7.2-million, according to the China Association of Automobile Manufacturers. LaSorda said Chrysler picked Chery after looking at potential partners in Europe and Asia.

"We researched the world and found they were the best," he said.

Asked whether Chrysler was worried that the alliance might help Chery develop into a competitor that might threaten its U.S. partner, LaSorda told the Associated Press, "No, we're not. With us or without us, they're going to grow. So the question is, 'Are you going to go with a winner?' "

The venture's production could reach several hundred thousand units a year, LaSorda said.

"This is the start of a very long relationship between Chrysler and Chery," he said.