Here We Go! - DaimlerChrysler May Export Chrysler Cars to U.S. From China

April 21, 2005; Bret Okeson writinf for Bloomberg reported that DaimlerChrysler AG, the first overseas company to make vehicles in China, plans to build Chrysler compact cars in the country to export to the U.S., taking advantage of wages one-18th those of U.S. workers.

DaimlerChrysler, the world's fifth-largest vehicle maker, is in talks with Fujian Motor Industry Group to form the venture in southeastern China, said officials from the two companies. The entry-level Chrysler model has not yet been developed, said DaimlerChrysler's China chief Ruediger Grube.

The carmaker is following Honda Motor Co. and General Motors Corp. in producing vehicles in China for export, as sales growth in the world's third-largest vehicle market slowed. Honda, Japan's third-largest carmaker, exports Fit compact cars from southern China while GM said it would make Chevrolet Aveo compact cars in Shanghai for overseas markets.

China ``certainly is going to have a large market for its own consumption, but there's also an opportunity to source vehicles for other markets of the world,'' said James Power IV, executive vice president of J.D. Power & Associates, in an interview today at the Auto Shanghai 2005 show.

DaimlerChrysler will decide in the second half of this year whether it should proceed with the venture, Grube said today.

``Reality''

``It's not so much a trend as the reality,'' said GM's Vice Chairman Bob Lutz, at a ceremony on Tuesday to unveil its Aveo. ``Anybody who wants entry into this low end of the market finds it can no longer be done in the U.S., it has to be done in a low- cost country.''

China had a record $162 billion trade surplus with the U.S. last year. China's average labor cost is 1.5 euro per hour, Grube said. That compares with the hourly average of 38 euros in Germany, 31 euros in Japan and 28 euros in the U.S., he said.

``China has a big advantage where labor costs are concerned,'' Grube said. Shipping cars to North America from China is ``no the highest part of the cost,'' he said.

DaimlerChrysler shares rose 0.3 percent to 32.25 euros in Frankfurt.

DaimlerChrysler has invested 1.2 billion euros ($923 million) in China. The company, based in Stuttgart, Germany, makes Jeep sport-utility vehicles with Beijing Automobile Holding Co. in the Chinese capital and builds Mercedes-Benz vans with Fujian Motor.

Mercedes in China

DaimlerChrysler also plans to start building Mercedes-Benz C-Class and E-Class cars in China this year, two years behind Bayerische Motoren Werke AG and 20 years after Volkswagen AG began production in the country. Production should begin in either October or November, DaimlerChrysler said. DaimlerChrysler is not planning to export Mercedes from China, Grube said.

Sales of Mercedes-Benz luxury cars grew 3 percent in the first quarter in China, Grube said, declining to say how many units were sold. The company has also set up a purchasing unit in China to cut the cost of parts. It will establish a design center in China in the second half of the year.

The company expects the total market for luxury segment in China to be about 260,000 units annually.

China's car sales rose 15 percent last year, slowing from the 76 percent surge in 2003 and a 50 percent growth in 2002. Overseas carmakers including DaimlerChrysler, GM, Toyota Motor Corp. and Volkswagen have invested an estimated $19 billion in the country's car industry in the past three years.