DaimlerChrysler to bring Chinese subcompact to North America

Canadian Press

DaimlerChrysler Canada executives said Wednesday the company has a "framework for an agreement" with China to manufacture a subcompact car for the North American market.

The car would be manufactured by Chinese automaker Chery Automobile Co., company executives told media in a conference call Wednesday.

DaimlerChrylser CEO Reid Bigland and Steven Landry, the company's executive vice-president for sales and marketing in North America, said Wednesday in a conference call with reporters that it was possible the company could manufacture more than one car in partnership with Chery.

"We have a framework for an agreement ... and we'll continue to have ongoing meetings," Lori McTavish, the company's vice-president of communications, said at the end of the conference call.

The deal is still pending final approval from the Chinese government, McTavish said.

Bigland and Landry said the subcompact is very high on the company's list of priorities, since the category represents 11 per cent of the Canadian car market and is growing at a compounded rate of 15 per cent per year.

Their statements follow earlier reports by a German newspaper, which had said China had put the deal on hold after DaimlerChrysler announced it plans to sell most of Chrysler to private equity firm Cerberus Capital Management in a US$7.45 billion-dollar deal.

Last week, DaimlerChrysler's supervisory board formally cleared the way for the sale of 80.1 per cent of the company's money-losing U.S. unit to Cerberus.

The board added that "the closing of the transaction is expected to take place in the third quarter," but gave no further details.

The head of the Canadian Auto Workers said he was disappointed to hear more foreign imports appear to be headed for Canadian markets.

"Maybe this will spark a debate in the country," Hargrove said in an interview Wednesday. "Do we want to be hewers of wood and drawers of water, instead of doing manufacturing?"

Hargrove said his union is planning rallies this Sunday in Windsor and Oshawa to protest the loss of jobs as a result of foreign imports; another national demonstration is to take place on Parliament Hill in Ottawa on May 30.

Hargrove said DaimlerChrysler and Cerberus had promised there would be no new job cuts as part of the takeover deal.

"We got the commitment there would be no cuts, period," Hargrove said. "We were pleased as pudding."

Hargrove said the union, which will see its contract expire in September 2008, got a promise to save 900 jobs on the third shift at Chrysler's plant in Brampton, Ont., in exchange for giving up a salary bonus of 45 minutes pay per shift.

"We chose the jobs," Hargrove said.

But a May 15 letter from DaimlerChrysler to the Canadian Auto Workers appears to give the company some wiggle room on job cuts, indicating there are no cuts planned "in connection with" the takeover deal.

"You should know that there are no new plans – other than those previously announced – to reduce head count. Excluding abnormal market conditions and productivity, there are no additional job cuts in connection with the transaction announced," John Franciosi, senior vice-president of employee relations, wrote in the letter to Hargrove.

The outspoken union leader was initially opposed to the sale of Chrysler, which has numerous plants in Ontario, to a private-equity firm rather than to an industrial company such as Canadian autoparts maker Magna International (TSX: MG.A), which also made a bid.

DaimlerChrysler, which is to launch a new vehicle to be manufactured in Brampton next month, reported April sales were up 6.2 per cent.

CEO Reid Bigland, who noted the company's fortunes have been steadily increasing over the past year, said he expects May sales figures will show 10 consecutive months of sales increases.

Daimler-Benz and Chrysler teamed up in 1998 in a US$36 billion-dollar deal that, at the time, was dubbed the "merger of equals."