DCX CEO : We don't want to sign with Chery : Chery is just a bargaining chip

DaimlerChrysler talks to 2 firms on small car: paper
Reuters
Monday, October 23, 2006; 3:51 AM

FRANKFURT (Reuters) - DaimlerChrysler (DCXGn.DE) has cut to two its list of potential partners for building a small car, Chief Executive Dieter Zetsche told a newspaper, but is wary about giving any Chinese firm a leg up in the U.S. market.

"We spoke with a handful of possible partners and there are two left now," he said in an interview published on Monday in Germany's Frankfurter Allgemeine Zeitung, adding that he still hoped to have a contract on the subcompact signed by year's end.

Industry sources have said China's Chery is one of the companies in talks, and Zetsche said cost/benefit analysis spoke in favor of Chery because DaimlerChrysler could not make small cars at costs that would make the business "comfortable."

On the other hand, he said, some partners did not offer the quality needed to make the small car in conjunction with U.S. arm Chrysler for sale in North America and elsewhere.

Asked whether he was worried that he could be giving a Chinese carmaker a platform to enter the U.S. market, he said:

"One reason why we have not concluded a deal with the potential partners is also the question of how we avoid that. We have very clear ideas there.

"Regardless of this, there is no doubt that not only Chery but also other Chinese rivals will sell their products in America and the rest of the world, with us or without us."

Chinese carmakers have used joint ventures with foreign manufacturers to build up a booming domestic industry but are increasingly looking to use this knowhow to develop their own products that can compete in China and on export markets.

One source familiar with the matter told Reuters that talks between Chrysler and Chery could drag on for some time given disagreements mainly over pricing and profit sharing.

-- Additional reporting by Fang Yan in Shanghai

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