Monday, May 21, 2007

Chery Halts Project With DaimlerChrysler

Associated Press 05.21.07, 5:40 AM ETChery, the Chinese automaker that DaimlerChrysler AG formed a limited partnership with to build Chrysler-branded cars, wants to re-examine the deal in light of the sale to Cerberus, a newspaper reported Monday.

Zhang Li, the general manager of Chery Automobile Co. Ltd., told the German financial daily Handelsblatt the company has halted the project and wants to renegotiate its agreement on building a new compact for Chrysler.

The decision, the paper reported, came after DaimlerChrysler (nyse: DCX - news - people ) agreed last week to sell its money-losing Chrysler Group to private equity firm Cerberus Capital Management LP in a euro5.5 billion (US$7.41 billion) deal.

Zhang said the deal came as a "total surprise" for his company and it had not yet talked with Cerberus about the move.

"We continue to be in talks with Chrysler, but we don't have any contact with the new owners yet," Handelsblatt quoted Zhang as saying.

Calls made to DaimlerChrysler in Stuttgart were not immediately returned.

The euro5.5 billion (US$7.41 billion) deal unraveled a 1998 US$36 billion takeover, which attempted to create a global automotive powerhouse. The future Daimler AG will retain a 19.9 stake in Chrysler.

Analysts say the German company will do much better when it sheds most of it's American arm, which is expected in the third quarter.

DaimlerChrysler shares were down 0.5 percent at euro64.08 (US$86.36)

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