US car maker cancels small-car sharing agreement
10 December 2008

Chrysler and Chery Automobile have cancelled a cooperation agreement to build small cars in China.

The deal - in which both manufacturers would unite to jointly produce small cars for South America, North America and Europe - was signed in 2007 and was one of the US car maker’s biggest overseas projects.

Chrysler would have benefited from low manufacturing costs, while Chery would have taken advantage of a brand recognised in the western world.

But plans to launch a cheap new small car were delayed after Chrysler and Chery struggled to bring the model up to Western safety and environmental standards.

The termination of the project will come as a body blow to struggling Chrysler, which is currently asking for $15 billion bailout from the US government.

Chrysler has been seeking partnerships with other manufacturers for the past two years. It has failed to build a presence in markets outside the US, and sells just 10 per cent of its vehicles abroad.

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The company is currently linked with Renault-Nissan, and Renault-Nissan boss Carlos Ghosn is keen have an American partner. Nissan is scheduled to build a small car for Chrysler in Japan from 2010.

Previous behind-the-scenes merger talks between the two firms were reported to have stalled last year.

Will Powell

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