Thursday, July 12, 2007

Chrysler's Chery to be a $10,000 car

McClatchy-Tribune News Service
Published July 6, 2007, 10:18 AM CDT

Chrysler is unlikely to roll out a $7,000 car when it brings the first Chery-made American-brand small car to the U.S. market in 2009, U.S. industry analysts say.

Rather than hit the streets with an extremely cheap set of wheels, Chrysler and Chery will more likely beef up the Chery A1 to about $10,000 with features and content expected by American consumers.

Shortly after the Chinese government gave the OK to a deal between the two automakers, Chrysler CEO Tom LaSorda said his company would begin selling cars made by Chery Automobile Co. in South and Central America in 2008 and in North America by 2009.

Chery's president, however, indicated that a version of his company's new A1 car will be sold in the United States at a price of $7,000 -- half the price of the cheapest Chrysler vehicle on the market today -- and that it would be on the road by next year, according to reports by Bloomberg News.

Chrysler has not confirmed this and the statements appear to be at odds with what LaSorda said at the official event Wednesday.

The A1 goes for the equivalent of $7,100 to $7,900 in China, but no official export price has been set yet by Chrysler.

The automakers' messages are unified, however, on the most important matter of the week: Chrysler and Chery are raring to go with a partnership that will likely bring the first Chinese cars to U.S. dealerships.

"This is a significant deal," said George Magliano, Global Insight's director of automotive research for the Americas. "I don't think Chrysler can wait around on this thing. Everyone is scrambling to get these programs out there."

Magliano estimates the Chrysler-Chery vehicle will sell for around $10,000 in the U.S. market. "I don't think seven is going to work," he said. "First of all, what's going to sell is not a bare-bones vehicle. They can do what they want when they sell this thing in developing countries. ... In the U.S. this thing has got to be styled right, it's got to perform right, it's got to have quality, it's got to have safety. And you don't get that for $7,000."

Erich Merkle, director of forecasting for IRN Inc., agreed.

"If I were Chrysler I don't think I would sell it that cheap. I think you could sell it for more ... and make a profit off of it," he said. "Why create a price war if you don't have to?"

Merkle estimated the Chrysler-Chery vehicle will have lots of features, such as glowing cup holders, a powerful stereo and other features "younger people expect" and suggested it should sell for as much as $15,000.

"This vehicle probably will be targeted and marketed at the younger generation," he said.

Competition in the U.S. small car market has been heating up as gasoline prices have skyrocketed.

Ford has said it is working to develop a good small car by 2010 for the U.S. market, which already has entries from Chevrolet, Toyota, Honda and Nissan.

Chrysler wants into the game, too, but officials have said it cannot produce a small car competitively in North America.

Part of Chrysler's restructuring plan is to expand its global alliances so the company can bring vehicles to market quicker and cheaper.

Last winter, Chery and Chrysler announced that they had agreed in principle to a deal that would allow Chrysler to sell Chery-made vehicles around the world under a Chrysler nameplate, expected to be Dodge.

Chrysler parent company DaimlerChrysler AG approved the deal in February. DaimlerChrysler's decision to sell Chrysler threw the Chrysler-Chery partnership into question as the German parent company looked at potential buyers.

In May it was announced that private equity firm Cerberus Capital Management would invest $7.4 billion to acquire 80.1percent of Chrysler. The deal could be wrapped up as soon as this month.

At a ceremony Wednesday in Beijing, the Chinese government gave its approval to the deal, clearing the way for Chery and Chrysler to craft other contracts over which specific vehicles will be part of the partnership.

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