New Chryslers to be on slow boat from China

by James Bryant, January 4th, 2007, 7:00 am

In the last few months I’ve blogged a time or two about the inevitable, yet fuzzily scheduled arrival of Chinese-built cars on US shores. As fascinating as it might be to blog about GM’s plan to unveil the new Malibu at the North American International Auto Show in Detroit next week, China is where the real buzz is – again.

DaimlerChrysler’s Chrysler Group has inked a deal with China’s Chery Automobile to bring a Chinese-built car to the US sometime after 2007. The Chinese cars are to be what the industry calls B-segment vehicles – most of the rest of us call them subcompacts. I like to call them if-I-could-afford-something-else-I’d-buy-it cars. They usually sell for under $10,000. The cars are to be branded under Dodge, Chrysler, or Jeep.

When gas prices hit $3 per gallon again, DaimlerChrysler will need subcompacts and right now it doesn’t have a significant presence in that market segment. Profit margins on subcompacts are so slim it is virtually impossible for US automakers to build them with US labor.

To fill in the sub-compact gaps, Chrysler is working with Chery. The companies are working jointly on the design and engineering, but the car being developed is based on an existing Chery model. In addition to being bound for the US, the car will also be sold in Europe, China, India, and other markets.

This all sounds great, but like most things in the industry, it’s a bit of a crapshoot. There is inherent risk in hooking up with a government-owned Chinese company with an unproven track record and second-rate engineering and design capability. But if Chrysler and Chery can bring a safe, dependable, and inexpensive small car to the US market, they will not only make a profit, they’ll make history.