Chrysler Stands By Chery

Special Coverage

SAE World Congress

DETROIT – Chrysler LLC is committed to its small-car partnership with Chery Automobile Co. Ltd., but the China-based auto maker won’t be getting any free passes just because the deal portends cost-savings.

Chrysler Chairman and CEO Robert Nardelli reiterates the Detroit auto maker’s allegiance to Chery, which has come into question with this week’s announcement of the latest manufacturing agreement between Chrysler and Nissan Motor Co. Ltd.

Chrysler Chairman and CEO Robert Nardelli.

The new deal calls for Chrysler to build pickups for Nissan by 2011, while Nissan supplies a small car to Chrysler by 2010. Both vehicles are destined for North America, while the car also is aimed at Europe and “other global markets,” Chrysler says.

The arrangement follows January’s agreement that Nissan will supply a Versa-based B-segment car to Chrysler for sale in South America next year.

Against this backdrop, low-cost Chery, which is expected to supply Chrysler with 12 vehicles spanning three segments over the life of their agreement, discovers its vehicles are well short of North American consumer expectations. In response, Chrysler is moving to double its China contingent of engineers and procurement personnel over the next 18 months.

But Chrysler stands by its Chinese partner.

“We’re not going to limit ourselves to one platform, one vehicle,” Nardelli explains. “We think the consumer’s going to want a broader range of selection. And so we’re going to keep looking at if it makes economic sense, if it – from a platform standpoint – meets the customer demand (and) has all of the fuel efficiency and homologation for the U.S. market.”

And don’t misinterpret Nardelli’s repeated use of the ‘if’ word.

“You have to vet all of these opportunities,” he tells journalists after addressing the SAE World Congress banquet here. “We’re just looking at that as any prudent company would do to make sure that it meets all of the expectations that our customers will demand.”

Chrysler is determined to prevent any “impasse” that could scuttle the arrangement, Nardelli adds.

Meanwhile, Chrysler remains in the market for partners. “We’re always looking for opportunities,” he says. But that doesn’t include Fiat Automobiles SpA.

A German magazine reported this week the two auto makers were considering an arrangement that called for Chrysler to build Alfa Romeos for the North American market.

While Fiat is devising a North American strategy for Alfa Romeo, a spokesman dismisses the Chrysler report as “media speculation. I´m afraid that people are trying to outguess each other’s theories,” Richard Gadeselli tells Ward’s.

Nardelli dismisses the report out of hand, but confides he is “familiar” with Fiat through family in Italy and past associations with former Fiat chiefs Paolo Fresco and Gianni Agnelli, grandson of the auto maker’s founder.

Nardelli then lifts the veil, slightly, on his considerable connections in the business world and the benefits they have brought to Chrysler.

“I’ve been very fortunate over the years to establish a strong network of other CEOs who have been unbelievably supportive and helpful,” he says.

“Whether it’s talking to (The Boeing Company’s) Jim McNerney … or Jeff Immelt at General Electric, these are all great colleagues of mine that I can pick up the phone and call. They bring an outside-in perspective relative to innovation, relative to technology,” says Nardelli, whose speech also serves as a reminder that his knowledge of business extends beyond the retailing acumen he displayed as CEO of Home Depot Inc.

“My first job after college was as a manufacturing engineer in GE’s appliance park in Louisville,” he says. “Back in the (1980s), I had the privilege to lead the team that pioneered compact fluorescents, including the Circ Light and the Cube Light. That innovation laid the groundwork for the energy-saving move to fluorescents that you see today.”

And at Chrysler, Nardelli adds, “engineering and innovation are a critical part of our business strategy.”

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