After news of talks between Chrysler and Chery surfaced in May last year, Chrysler group CEO Tom LaSorda has finally signed a letter of intent with Chery Automobile Co to develop a small car for the group, but this is pending approval by DaimlerChrysler supervisory board, which will meet this month to discuss the matter. Other partners which were considered were Mitsubishi Motors Corp, and Hyundai Motor Co Ltd, but it is Chery who managed to clinch the deal in the end.

The collaboration is expected to be approved by the DCX board, and manufacturing will soon begin, according to Chrysler spokesman Jason Vines. It is not known for now Which badge under the Chrysler group will appear on the grille of this new small B-segment car, but the logical choice would be Dodge, the group’s value brand. Chrysler previously exhibited a concept small car, the Dodge Hornet, an aggressive-looking muscular small car, but the new compact from the Chery-Chrysler collaboration will not be the Dodge Hornet.

The car is expected to be built in China, as Chrysler says it cannot profitably produce a small car in the US. Chrysler has been in talks with Chery for nearly a year before this agreement was reached. More details will be released in a month’s time or earlier. The new small car will compete against the Toyota Yaris, Chevrolet Aveo, Honda Fit and Nissan Versa in the United States. It will also be sold in Canada, Mexico, Europe and possibly China. While this is a start for Chery’s involvement in the US market, but it is still keen to export it’s own cars under it’s own brand to the US as the small car will not be Chery-branded.

2006 was not a good year at all for Chrysler dealers in the US. The company kept cranking out minivans, medium to big cars and SUVs throughout the whole summer despite warnings and suggestions by dealers against the move. Chrysler just went on and on with overoptimism fueled by the success of the Chrysler 300. Despite employee pricing sales incentives and other promotions, dealers choked on inventory and floorplan bills skyrocketed with dipping sales. The Chrysler group posted a US$1.48 billion loss in the third quarter 2006. Will this new small car give Chrysler and it’s dealers a much needed boost? And even if so, what is Chrysler going to do with it’s sales bank of unsold cars? Instead of slowing down production when demand dropped, production was kept at full capacity, and now unsold Chrysler cars are just lying around in storage areas. Sound familiar?

Check after the jump for an interview with Tom LaSorda.

Related Posts:
2006 Dodge Hornet Concept
Dodge Attitude
[Read more...]

Chrysler is looking into using Chery Automobile to assemble a small car for the international non-US market. The car will be sold under the Dodge or Chrysler brand. This could allow Chrysler and Dodge to enter third-world markets like South East Asia, which are not big fans of Chrysler’s big cars with huge fuel-guzzling engines.

Daimler Chrysler already has an existing partnership with a Chinese company, Beijing Automotive Industry Corp. The joint venture assembles SUVs for Daimler Chrysler and recently the Mercedes Benz E-Class. But the JV company lacks experience and skills to manufacture small cars, which Chery has.

Chrysler could be seeking to produce the Dodge Hornet concept, a small B-segment vehicle smaller than Dodge’s smallest car, the Dodge Neon. The Dodge Hornet Concept was shown at the Geneva Motor Show in March 2006.