Monday, July 9, 2007

Chrysler to sell Chery A1 hatchback in U.S. in 2008

BEIJING: Chrysler will introduce a Chinese-made small car in the United States next year that retails for about half the price of its cheapest model, as it seeks to win back market share from Toyota and Honda.

Chrysler will begin selling Chery Automobile's A1 hatchback in the first quarter of 2008, Chery's president, Yin Tongyao, said in Beijing on Wednesday. The 1.3-liter A1 sells from 53,800 yuan, or $7,100, in China. Chrysler's least expensive U.S. model is the $13,850 Dodge Caliber, according to the Web site Yin did not say how much the A1 would cost in the United States.

Chrysler, which will be the first U.S. automaker to import cars from China, also plans to cut production at home after reporting a loss last year and slipping to fourth place in U.S. sales. Working with Chery will allow the company to add models able to compete with Toyota, which makes the Yaris, with less investment.

"It can be very unprofitable to develop new small-car platforms on your own," said Rebecca Lindland, a forecaster for Global Insight in Lexington, Massachusetts.

Chrysler plans to sell current and future Chery models worldwide. Chery may eventually build as many as 100,000 vehicles a year for Chrysler, Yin said at a signing ceremony Wednesday, without a providing a time frame. The capacity can also be expanded in the future, he added.

Chrysler aims to begin selling Chery-made vehicles under its Dodge brand in Latin America and Eastern Europe by the end of the year, Chrysler's chief executive officer, Tom LaSorda, said.

The company will decide on any possible equity cooperation with Chery in the future, he added.

DaimlerChrysler announced in May the sale of Chrysler to Cerberus Capital Management, after $680 million in losses last year, ending a nine-year merger. Cerberus, which is based in New York, will invest $7.4 billion as part of the transaction.

Under the agreement, Cerberus will buy 80.1 percent of Chrysler, while Daimler will retain the rest.

Chrysler plans to close a Delaware plant and to cut 13,000 jobs. On Tuesday it reported a 1.4 percent decline in June U.S. sales; Toyota gained 10 percent and Honda 11 percent. Toyota surpassed Chrysler in U.S. sales last year.

Chrysler plans to introduce 32 models from 2006 to 2010, an increase from 21 between 2000 and 2004.

"As part of Chrysler's global transformation, we are finding new ways to bring vehicles to market - faster, more efficiently, with less costs and the same high quality standards," LaSorda said.

Chery, China's first vehicle exporter, expects to raise sales 29 percent this year following a 60 percent increase last year, it said in January.

The company sold about 305,000 vehicles, including 50,000 exports, in 2006.

In the first five months of this year, the Chery had a 4.8 percent share of its home vehicle market, the world's second-largest behind the United States.

Chery has sold vehicles in more than 50 countries and regions, according to the statement. In November, it abandoned plans to export its own-brand vehicles to North America with Visionary Vehicles.

Chinese automakers have begun to target overseas sales as increasing competition at home crimps profit. Carmakers' profit margins in the country averaged 3.1 percent last year, compared with 9 percent in 2003, according to calculations based on figures issued by the country's automakers association.

Vehicle exports from China rose 80 percent from a year earlier to 47,000 in May. Last year, the tally almost doubled to 342,400, according to the customs bureau.

General Motors' South Korean unit filed suit in Shanghai against Chery in 2004, claiming that the Chinese automaker's QQ minicar was a copy of its Matiz model. The two sides settled the dispute out of court in 2005. Terms were not disclosed.

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