Monday, July 16, 2007

Chrysler: Be careful what you wish for

Keith Crain is publisher and editor-in-chief of Automotive News.


Automotive News
July 16, 2007 - 12:01 am

Chrysler announced on July 4 that it had entered into an agreement with Chery Automobile Co. of China for Chery to manufacture automobiles for distribution by Chrysler around the world, including the United States.

Chery is the company that Malcolm Bricklin had a deal with a while back. Nothing came of that, and it will be interesting to see whether anything will happen this time.

Make no mistake, Chery is a tiny automobile company (2006 global sales: 303,671). It is small in China and fairly insignificant in the world. The number of vehicles it manufactures each year is hardly a blip on anyone's radar screen.

There is some talk that Chery will start to sell its vehicles fairly soon in places like South America. That could be a huge mistake.

Chery vehicles do not meet high standards of emissions and safety, and their engineering and quality leave quite a bit to be desired.

Since Chrysler intends to put the Chrysler or Dodge brand on those vehicles, Chrysler had better make sure that they have world-class reliability and quality. Otherwise, Chrysler will risk its reputation everywhere it does business.

Because the vehicles' standards are so low, no Chinese cars are sold in the United States, and only a few are sold in Europe. Trying to force distribution into those markets prematurely will be a disaster for whatever company associates itself with Chinese manufacturers.

If Chrysler hopes to be successful with Chery, it will have to invest tens - no, hundreds - of millions of dollars in what should be considered just about a startup.

Chery will need basic design, engineering and manufacturing assistance. Someone will have to make sure that sooner or later, its cars meet western European and North American quality and reliability standards and display design and engineering competence.

If the only advantage for Chrysler is labor cost, it seems like a bad trade, considering everything that Chrysler will have to invest.

Chrysler seems to have its hands full these days in North America and Europe. I am amazed that the company is interested in such a huge undertaking with Chery.

Chrysler must shepherd its resources very cautiously in the next few years. It can't afford to do anything that will jeopardize its reputation or its brands.

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