Chrysler, China's Chery scrap plans to jointly design a car

BEIJING -- China makes almost everything else for your home, but more years lie ahead before its factories fill your garage. Chrysler, awaiting a government bailout, and Chery, China's top domestic brand, acknowledged Tuesday that they've shelved joint plans to build a car for the U.S.

"Today, Chrysler has a lot of trouble at home, so this is not a priority," says Yale Zhang, a Shanghai-based auto analyst for U.S. research firm CSM Worldwide. Chery and other Chinese carmakers "understand it is not easy to enter the U.S. market, where competition is fierce, sales are shrinking and the regulatory environment is much tougher. … None of them have a clear (U.S. sales) timetable, as they understand there is no hurry."

A Chery compact, planned for U.S. sale as a Chrysler within two years, would have been China's first foray into the market and given Chrysler a needed small car. It also would have been sold in Europe. Before either, a different model would have been sold in South America as a Chrysler.

In July 2007, the two companies celebrated the start of a "very long" and "successful relationship." Now, the long-distance engagement is off.

Citing "huge changes to the world economy and the car market," Jin Yibo, Chery sales vice president, said, "Now it is more beneficial for each side to develop its business independently."

Economic turmoil has been compounded by an internal Chrysler "evolution," said a statement from Mike Manley, Chrysler executive vice president of international sales. "As a result, many of the original premises the companies had when entering into the agreement no longer apply."

Behind the spin may lie deeper disagreements, says Zhang. "I believe the two parties had different thinking and conditions during the negotiations," including issues over quality, cash investment and technology transfers. Such mismatches, known in China as "same bed, different dreams," have plagued many Sino-foreign business ventures.

Another Chinese carmaker, Geely, had predicted in 2006 it would sell to American drivers by this year. Says spokesman Zhang Xiaoshu: "The halt to the Chrysler-Chery co-operations shows the challenges we all face. There are both opportunities and crises brought by the global economic crisis. … We plan to sell in the USA and are developing cars to suit that market, but it will not happen in the next 12 months."