Daimler looks at selling Chinese cars in U.S.

By Keith Bradsher The New York Times Published: September 15, 2006

BEIJING DaimlerChrysler is in talks with companies in China and elsewhere for the export of subcompact cars to North America, the company chairman, Dieter Zetsche, said here Friday in comments that could renew anxieties in Detroit about competition from China. Zetsche said that the company had concluded it could not competitively manufacture its own subcompact cars for its Dodge brand in North America and instead would need to import them. "We are aware we do not have a system which could produce a vehicle at an economically viable level," Zetsche said, adding that while negotiations had not yet produced an agreement, "We are very much progressing." During a news conference and in conversations with reporters immediately afterwards, Zetsche carefully avoided saying whether any of these negotiations were with companies in China. But during a very brief interview an hour later when he walked out a back door of the factory with two aides, he said it would be fair to describe the talks as being conducted with companies in China and elsewhere. No multinational has begun sustained car exports from China to the United States or announced concrete plans to do so. Honda is now shipping Jazz hatchbacks to Belgium from Guangzhou in southeastern China, however, and several Chinese automakers have announced plans to export to the United States, notably Geely, Chery and Lifan. DaimlerChrysler's interest in importing a subcompact to the United States is not new. Rüdiger Grube, executive vice president and the management board member of DaimlerChrysler responsible for China and corporate development, made the biggest news of the Shanghai auto show in April, 2005, when he told a small group of reporters that the company was in talks with one of its Chinese partners to create a joint venture for the export of subcompacts to the United States. But Grube's remarks upset the United Automobile Workers union and DaimlerChrysler quickly backpedaled, refusing even to confirm to other reporters that Grube had made the remarks at the Shanghai show. During a tour of a new factory here before Zetsche's news conference, two DaimlerChrysler spokesmen said in separate conversations that they were not aware of any move by the company to pursue the import of subcompacts from China to the United States. Grube also attended the news conference with Zetsche on Friday. In an interview afterward, he said that DaimlerChrysler was reviewing "common interests and capabilities" with potential suppliers of subcompacts to the American market, but declined to say if any of these potential suppliers were in China. Like Zetsche, he also declined to identify any companies involved in the negotiations. The Chrysler operations of DaimlerChrysler are faring better in the United States than Ford or General Motors, partly because of the success of large Chrysler cars like the 300C. But Chrysler wants to share in concessions that the UAW could make to Ford and GM, and it tries to cooperate with the union whenever feasible. Zetsche and Grube spoke after attending the opening ceremony for the first factory in China by DaimlerChrysler's Mercedes unit, part of a broad effort by DaimlerChrysler to catch up in China. It has had a slow start here that has left it dead last in market share among the main multinational auto groups, with just 0.3 percent of the market in July, the most recent month available, or 1.4 percent if the DaimlerChrysler's stake in Mitsubishi is included. By contrast, Volkswagen had 16 percent; GM, 11 percent; Honda, 7.2 percent; Toyota, 6.2 percent; Nissan, 4.9 percent; and Ford, 2.9 percent, according to figures compiled by Automotive Resources Asia, a consulting firm that was acquired on Tuesday by J.D. Power & Associates. DaimlerChrysler relied for years on the production of Jeeps at an aging Beijing factory that was one of the first automotive joint ventures. Chinese officials were still wearing Mao suits when the venture was set up in 1983, while executives from American Motors, later purchased by Chrysler, were wearing suits and ties. That inner-city factory closed early this year and has since been demolished by the Beijing municipal government as part of preparations for the 2008 Olympics. Jeep sales have plummeted because of competition from cheap Chinese sport utility vehicles, and production has been transferred to a factory near Beijing that is owned by Beijing Automotive Industry Holding. The factory that officially opened Friday on the outskirts of Beijing has two assembly lines, one with the capacity to produce 25,000 E-class and C- class Mercedes a year and the other with the capacity to make 80,000 Chrysler 300C large sedans and Mitsubishi Outlander crossover utility vehicles each year, all for the Chinese market. The star-crossed operation has had a series of difficulties, from finding local suppliers that meet Mercedes standards to discovering at the site more than two dozen tombs that have been preliminarily assessed as dating from the Han dynasty, about 2,000 years ago. Government archeologists are still examining the tombs - under Chinese law, DaimlerChrysler has to pay for the government's excavation of the site. DaimlerChrysler had planned to put the factory employees' activities center where the tombs are, and still hopes to do so once the archaeological work has been completed, said Günter Butschek, president and chief executive of the joint venture that runs the factory. BEIJING DaimlerChrysler is in talks with companies in China and elsewhere for the export of subcompact cars to North America, the company chairman, Dieter Zetsche, said here Friday in comments that could renew anxieties in Detroit about competition from China. Zetsche said that the company had concluded it could not competitively manufacture its own subcompact cars for its Dodge brand in North America and instead would need to import them. "We are aware we do not have a system which could produce a vehicle at an economically viable level," Zetsche said, adding that while negotiations had not yet produced an agreement, "We are very much progressing." During a news conference and in conversations with reporters immediately afterwards, Zetsche carefully avoided saying whether any of these negotiations were with companies in China. But during a very brief interview an hour later when he walked out a back door of the factory with two aides, he said it would be fair to describe the talks as being conducted with companies in China and elsewhere. No multinational has begun sustained car exports from China to the United States or announced concrete plans to do so. Honda is now shipping Jazz hatchbacks to Belgium from Guangzhou in southeastern China, however, and several Chinese automakers have announced plans to export to the United States, notably Geely, Chery and Lifan. DaimlerChrysler's interest in importing a subcompact to the United States is not new. Rüdiger Grube, executive vice president and the management board member of DaimlerChrysler responsible for China and corporate development, made the biggest news of the Shanghai auto show in April, 2005, when he told a small group of reporters that the company was in talks with one of its Chinese partners to create a joint venture for the export of subcompacts to the United States. But Grube's remarks upset the United Automobile Workers union and DaimlerChrysler quickly backpedaled, refusing even to confirm to other reporters that Grube had made the remarks at the Shanghai show. During a tour of a new factory here before Zetsche's news conference, two DaimlerChrysler spokesmen said in separate conversations that they were not aware of any move by the company to pursue the import of subcompacts from China to the United States. Grube also attended the news conference with Zetsche on Friday. In an interview afterward, he said that DaimlerChrysler was reviewing "common interests and capabilities" with potential suppliers of subcompacts to the American market, but declined to say if any of these potential suppliers were in China. Like Zetsche, he also declined to identify any companies involved in the negotiations. The Chrysler operations of DaimlerChrysler are faring better in the United States than Ford or General Motors, partly because of the success of large Chrysler cars like the 300C. But Chrysler wants to share in concessions that the UAW could make to Ford and GM, and it tries to cooperate with the union whenever feasible. Zetsche and Grube spoke after attending the opening ceremony for the first factory in China by DaimlerChrysler's Mercedes unit, part of a broad effort by DaimlerChrysler to catch up in China. It has had a slow start here that has left it dead last in market share among the main multinational auto groups, with just 0.3 percent of the market in July, the most recent month available, or 1.4 percent if the DaimlerChrysler's stake in Mitsubishi is included. By contrast, Volkswagen had 16 percent; GM, 11 percent; Honda, 7.2 percent; Toyota, 6.2 percent; Nissan, 4.9 percent; and Ford, 2.9 percent, according to figures compiled by Automotive Resources Asia, a consulting firm that was acquired on Tuesday by J.D. Power & Associates. DaimlerChrysler relied for years on the production of Jeeps at an aging Beijing factory that was one of the first automotive joint ventures. Chinese officials were still wearing Mao suits when the venture was set up in 1983, while executives from American Motors, later purchased by Chrysler, were wearing suits and ties. That inner-city factory closed early this year and has since been demolished by the Beijing municipal government as part of preparations for the 2008 Olympics. Jeep sales have plummeted because of competition from cheap Chinese sport utility vehicles, and production has been transferred to a factory near Beijing that is owned by Beijing Automotive Industry Holding. The factory that officially opened Friday on the outskirts of Beijing has two assembly lines, one with the capacity to produce 25,000 E-class and C- class Mercedes a year and the other with the capacity to make 80,000 Chrysler 300C large sedans and Mitsubishi Outlander crossover utility vehicles each year, all for the Chinese market. The star-crossed operation has had a series of difficulties, from finding local suppliers that meet Mercedes standards to discovering at the site more than two dozen tombs that have been preliminarily assessed as dating from the Han dynasty, about 2,000 years ago. Government archeologists are still examining the tombs - under Chinese law, DaimlerChrysler has to pay for the government's excavation of the site. DaimlerChrysler had planned to put the factory employees' activities center where the tombs are, and still hopes to do so once the archaeological work has been completed, said Günter Butschek, president and chief executive of the joint venture that runs the factory.