Chrysler and China’s Chery call off talks

The proposed partnership with Chery Automobile Co., first announced in July 2007, was meant to produce a low-cost model in China to be sold under Chrysler’s Dodge brand in the United States and Europe.

“There’s a global financial crisis happening, and the two sides decided it would be better for both companies to develop independently and promote their own businesses,” said Chery spokesman Jin Yibo. He said the talks were officially called off Monday.

The companies declined to disclose details of the talks.

Auburn Hills, Michigan-based Chrysler LLC, which is seeking U.S. government aid to avoid a financial collapse, had hoped the Chery partnership would add to its small car lineup following its May 2007 split with Germany’s Daimler AG.

The companies have gone through “major internal changes and evolution, resulting in different business directions and priorities,” Mike Manley, Chrysler’s executive vice president for international sales, said in a statement.

“As a result, many of the original premises the two companies had when entering into the agreement no longer apply,” Manley said.

Chery wanted the Chrysler ties to improve its technology and spur its expansion in the United States and other Western markets.

The venture’s first model was to be a compact based on Chery’s 1.3-liter A1 and Chrysler said the companies might jointly develop future vehicles.

Chrysler CEO Tom LaSorda said in 2007 the first vehicles might reach the United States in 2 1/2 years. But the companies later postponed that, saying they needed to work on safety and emissions.

Chrysler and General Motors Corp. are seeking a total of US$14 billion to US$15 billion to survive through early 2009. Ford Motor Co. has said it has enough money to stay afloat unless one of the other Big Three U.S. automakers goes under or the economy deteriorates more sharply.

Sales in China’s fast-growing auto market, the world’s second-largest, also have weakened but not as severely as in the United States.

Passenger car sales in China fell 10.3 percent in November from a year earlier, state media reported Monday, citing industry data. It was the third month out of four that car sales have contracted. Sales rose in October.

China’s government Export and Import Bank is lending Chery 10 billion yuan (US$1.5 billion) to help support its international expansion.

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