Friday, August 10, 2007

Chrysler's global footprint to grow

Bryce G. Hoffman / The Detroit News

TRAVERSE CITY -- Chrysler LLC plans to open engineering centers in China, Poland and India and is exploring expanding relationships with two Asian automakers as it moves to grow globally in the wake of its failed marriage to Germany's Daimler AG.

The automaker also is hiring engineers at its Auburn Hills headquarters and its proving grounds in Chelsea to help develop new models and technologies, Chrysler product chief Frank Klegon said Thursday at the auto industry's annual Management Briefing Seminars.

"We realize that we can't just be the same company that we were before the 1998 merger with Daimler-Benz," Klegon said. "The competition is tougher, and it's global."

And analysts say Chrysler must become a global player to thrive as a stand-alone company.

"For Chrysler to increase its viability, it definitely does have to have some relationships with offshore partners," said George Peterson, president of California-based consultant AutoPacific Inc. "It's tough for them to get the same economies of scale just having a North American presence."

Klegon said the automaker will add an engineering facility in China as part of its collaboration with Chery Automobile Co. and expand its engineering presence in China. He also announced plans to open an engineering facility in Warsaw, Poland, to serve the burgeoning Eastern European market, and plans to expand its engineering presence in India to support local suppliers in that area.

"I need people on the ground," he said, adding that these efforts are about "more than just components."

"Production in these lower cost regions could potentially be exported to other regions," Klegon said. The company already produces a version of its Chrysler 300 sedan in China for sale there. It is looking at using some of the components produced for that model in the version it assembles in Canada for the U.S. market.

"The next step would be working with our partners to potentially combine development of a vehicle that could be produced over there and shipped elsewhere," he said.

Chrysler's relationship with Chery calls for the Chinese automaker to build vehicles for Chrysler in China that would be exported around the world.

Chrysler is also re-evaluating its relationships with South Korea's Hyundai Motor Co. and Japan's Mitsubishi Motors Corp. Chrysler already has a successful engine alliance with those manufacturers and is interested in building on that.

"There's no commitment at this point," Klegon said. "They're both interesting companies -- particularly Hyundai -- and we'll see if we can generate some future opportunities with them."

Chrysler has had a long relationship with Mitsubishi, but it has not always been smooth.

DaimlerChrysler AG had an equity stake in Hyundai that ultimately fell apart, but Klegon said the newly independent Chrysler may be able to pick up the pieces.

"That was part of some of our internal conflicts as the DaimlerChrysler organization. Maybe as the Chrysler Group, we can rekindle some of those things with Hyundai," he said. "We talk to them quite a bit on the component side, particularly on powertrains that may be a foundation."

For example, he said Hyundai could produce engines for Chrysler's vehicles in China, while Chrysler could produce engines for Hyundai vehicles in this country.

Analyst Peterson said both Hyundai and Mitsubishi would be "strong partners going forward."

Neither Hyundai nor Mitsubishi responded to requests for comment Thursday, but a Hyundai source has told The Detroit News the South Korean automaker is open to proposals. The two companies meet regularly because of the engine alliance.

Chrysler also is counting on its relationship with Daimler, which is keeping a 19.9 percent stake in the company. Klegon said Chrysler will still have access to technology developed in Germany, after it is rolled out to Daimler's Mercedes-Benz brand.

However, Klegon said Chrysler's divorce from Daimler also opens the door to new possibilities. He called Daimler a "bureaucratic" organization that kept Chrysler from moving as quickly as it would have liked. As a private company, we're able to make decisions more quickly and thus move faster to respond to the market," he said. He said Cerberus had approved nine major projects in 36 hours -- something that would have taken weeks to accomplish before.

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