Chery to Reconsider Deal With Chrysler

by : Evander Klum

According to reports Chery, the Chinese auto maker that DaimlerChrysler AG has previously formed a limited partnership with the intention of building Chrysler-branded cars wants to re-examine the deal again in lieu of the sale to Cerberus.

Zhang Li, the general manager of Chery Automobile Co. Ltd., in an interview with the German financial daily Handelsblatt said that the company has stopped the project and would like to renegotiate its agreement on building a compact for Chrysler. This is in connection with the sale of the money-losing Chrysler Group to a private equity firm Cerberus Capital Management LP in a $7.41 billion deal.

Zhang said the deal totally surprised his company and it has not yet talked with Cerberus about the move. Handelsblatt also quoted Zhang as saying, "We continue to be in talks with Chrysler, but we don't have any contact with the new owners yet."

Mary Gauthier, spokesperson for the German-American auto maker in Stuttgart said that the global growth remains to be a priority of Chrysler as part of its transformation and recovery plan. She also added that the sale of the Chrysler Group to Cerberus have not changed those goals. There were no signs of apprehension at the news conference that was recently held in Michigan as Chrysler broke ground on a $700 million axle plant north of Detroit.

General Holiefield, the United Auto Workers' Chrysler Division Vice-President together with Chrysler and government officials has regarded the plant as a sign that Cerberus has faith in the automaker's turnaround plan.

However Holiefield has refrained from answering questions whether they the UAW would give Chrysler the manufacturer of quality with the same health care concessions they have given Ford and GM. He also refused to discuss issues regarding any effort by Chrysler to negotiate a way out of its estimated $19 billion long-terms retires health care liability.

Instead of discussing the above issues he diverted the attention to the construction of the plant which replaces an outdated factory in Detroit. He said that it is a sign that Cerberus is really interested in Keeping Chrysler competitive. He together with the rest of the UAW members expressed their happiness that Chrysler was again an American company.

Construction on the new plant will start next month. Chrysler also said that state-of-the-art axles are coming off the line sometime in 2010. Chrysler will break ground on a new engine plant in Detroit suburb of Trenton next and will announce several more plant investments in the weeks to come. However the locations were not disclosed.

It can noted that Chrysler has previously announced specifically last April that it would spend $1.78 billion on transmission and engine facilities, which include Marysville and Trenton plants plus some $300 million paint shop at its assembly plant in Sterling Heights and a $50 million investment in its Warren stamping and assembly complex.

The axles that will be produced at the new plant will also be sold to Mercedes-Benz and will make cars more fuel efficient explained Frank Ewasyshyn, Chrysler's Executive Vice-President of Manufacturing.

But it would not be like any automakers that are outsourcing parts such as axles; Chrysler wanted to keep them in-house because it has exclusive technology. These axles are not like those produced by other automakers Ewasyshyn said that the axles that they will produce will make cars more efficient since it will reduce friction and heat in sending power to the wheels.

The new axle plant will replace the Detroit Axle plant which currently employs more than 1,600 workers. The new engine plant will also replace the current engine plant at Trenton which also employs 1,600 people.