Chrysler inks deal for Chinese cars

Chery Automobile Co. Ltd., a feisty newcomer to global carmaking, is on the verge of becoming the first Chinese firm to crack the U.S. auto market.

On Tuesday, DaimlerChrysler AG said it made final a deal with Chery and the Chinese government to export small cars made by Chery to the United States and Western Europe. The deal, a broad framework for strategic cooperation, was signed yesterday at a ceremony in Beijing. Chery cars will be sold under the Chrysler, Jeep or Dodge brand.

The first cars will reach Latin America or Eastern Europe within a year, and models should be exported to North America and Western Europe in 21/2 years, said Chrysler chief executive officer Tom LaSorda.

Essentially a state-owned enterprise with strong backing from local and central government, Chery was created in 1997 to help the economy of Wuhu, a city about 150 miles west of Shanghai. The company is viewed as a rebel in the Chinese auto industry. Chery constructed its first assembly line in secret, violating Chinese law. Its biggest competitive advantage is that it excels at manufacturing small, fuel-efficient vehicles at low cost.

Chery sold 300,000 cars last year - roughly the output of one large U.S. assembly plant. But like other Chinese automakers, Chery has dreamed of a big presence in the United States, the world's largest and most lucrative car market.

At the same time, the Chinese government has aggressively supported the expansion of its automakers. Its goal is for Chinese cars to make up 10 percent of the world's auto trade in the next decade.

Chery will still make its cars in China, but by tying itself to a partner with thousands of outlets in the United States, it might be taking a shortcut.

But how will cars exported from China rate with finicky American car buyers?

"Poisonous fish. Tainted toothpaste. Tires that explode. 'Made in China' carries with it today a liability in the minds of consumers," said Maryanne Keller, a longtime industry analyst.

The only way the partnership would work, she said, was if Chrysler planted a large team of engineers in Wuhu and exerted quality control over every part that went into the cars.