Chrysler: What’s Chery’s Role?

Chrysler: What’s Chery’s Role?

Chrysler’s top exec in China says the automaker is exploring how to fill holes in its product portfolio in small-car segments, the largest-volume categories in the country. And the holes won’t be plugged by Chrysler’s current Chinese partner, Chery.

Simon Elliott, president and CEO of Chrysler Group China Sales Ltd., reiterated what AutoObserver reported during the Frankfurt auto show last month, when Chrysler’s top designer Trevor Creed said Chery would not be Chrysler’s partner in building the B-segment Hornet, a concept for an international people mover. Creed said Chery’s platforms were not appropriate for the Dodge Hornet, and the hunt for another partner was ongoing.

The comments by the two Chrysler executives beg the question: So what is Chery’s role with Chrysler?

Elliott told The Wall Street Journal in Monday's edition that the small- and compact-car segments are “very much under our spotlight.” He said Chrysler does not currently have the right type of vehicle to fill those holes in its lineup. Indeed, the smallest car Chrysler now builds is the Dodge Caliber, categorized in the larger C-segment.

Elliott told the newspaper Chrysler was looking for a partner who could ensure pricing and quality. He added that Chrysler did not plan to work with current partner Chery on the project.

Before these comments from Elliott and Creed, Chrysler was thought to be working with Chery on a redesigned version of Chery’s A1 model, which would be used as the basis for the Dodge Hornet to be sold in Europe and North America.

The deal with Chery was negotiated when Chrysler was part of DaimlerChrysler. Since then, Chrysler was purchased by private equity firm Cerberus. And Chrysler has hired Phil Murtaugh, the former General Motors executive credited with the automaker’s phenomenal success in China. Murtaugh left GM after 32 years and joined GM’s Chinese partner, SAIC Corp. Elliott told The Wall Street Journal said China’s small-car business may accelerate with Murtaugh in charge.

Chrysler wants a partner that has an appropriate platform upon which it can put its own “top hat,” as Chrysler CEO Bob Nardelli describes it. The Dodge Demon sports car could well be one of those top hats along with the Hornet.

Chrysler has been rumored to be talking with Korea’s Hyundai and Japan’s Mitsubishi on some projects. The trio already builds a global four-cylinder engine together.

Chrysler currently builds and sells Jeeps, the Chrysler 300 and Grand Voyager in China. The automaker, under its new ownership of Cerberus Capital Management, is expanding globally, particularly in growing markets like China. Elliot predicted to The Wall Street Journal that Chrysler would more than double China sales this year, from 8,000 to 20,000 units. It also is expanding its dealerships and Chinese component sourcing. Chrysler’s purchasing staff in China will grow 40 to 50 percent in the next few years he told the paper.

Still, where does Chery fit in?

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.