China automaker to build cars for Chrysler

updated 4:42 p.m. ET Jan. 4, 2007

DETROIT - DaimlerChrysler AG's Chrysler Group and China's Chery Automobile Co. have agreed on a plan for the Chinese manufacturer to build small cars to be sold worldwide.

The cars, to be designed jointly by Chery and Chrysler with Chrysler taking the lead, would be sold as a Chrysler Group brand, either Chrysler, Jeep or Dodge, said Chrysler spokesman Jason Vines. Chery will build tiny cars known in the industry as "B-cars," but it also may build something larger for Chrysler, Vines added.

The deal needs to be approved by Chrysler's supervisory board, which meets next month, and by the Chinese government.

Chrysler has been seeking a Chinese partner to build small cars, saying it cannot make money by building them in the United States due to high labor and other costs.

"We can't build one here in that segment. You can't make any money on it. That's why we need a partner," Vines said.

He said Chrysler would unveil a prototype "fairly soon," although no date has been set. Production will not start until sometime after 2007, Vines said.

Chrysler would not say how many cars Chery would build and it would not reveal the financial terms of the agreement.

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