DaimlerChrysler mum on Chery partnership report

Reuters / September 25, 2006 - 9:00 am FRANKFURT -- DaimlerChrysler AG declined comment on a magazine report today that it had picked China's Chery Automobile as a partner to build subcompact models for sale in the United States under the Dodge brand.

Germany's Der Spiegel said the partners would also examine joint production of small cars that could appeal to U.S. customers amid near-record fuel prices.

DaimlerChrysler has confirmed it is seeking a partner for the project, and industry sources have said candidates included Chery, Japan's Mitsubishi Motors Corp. and South Korea's Hyundai Motor Co. Ltd.

Volkswagen has dropped out of the search.

The Chrysler group needs a partner because of the costs of designing, manufacturing and marketing a new car that can take up the slack from faltering sales of pickups and SUVs.

Last year, the U.S. subcompact segment topped 180,000 vehicles -- only 1 percent of the overall market -- but is expected to surge to 290,000 this year and about 370,000 in 2007 because of increasing consumer concern over fuel prices.

Chery is among a handful of upstart Chinese vehicle makers, including Geely Automobile Holdings Ltd. and Great Wall Motor Co. Ltd., that are eager to push exports to diversify beyond the potentially saturated home market.

Chery aims to sell at least 30,000 vehicles outside China this year, accounting for 10 percent of its total sales volume.