ArvinMeritor Forms Venture With China's Chery

Hoping to triple sales in Asia within five years, ArvinMeritor Inc. announces a new joint venture with Chinese auto maker Chery Automobile Co. Ltd. to design and manufacture chassis systems and components.

ArvinMeritor will have the controlling share of the 60/40 joint venture, which will be based in Wuhu, China.

Chery is a fast-growing auto maker in east China and recently inked a deal with Chrysler Group to export small cars to the U.S. under the Chrysler badge.

ArvinMeritor is a supplier of suspension systems to Chrysler, but Phil Martens, president of ArvinMeritor's Light Vehicle Systems unit, says he does not know yet if the new JV will supply parts for the Chrysler-badged car, although he admits: “It would be nice.”

Company officials expect ArvinMeritor Chassis Systems Wuhu Co. to develop into a $150-million full-systems chassis supplier by 2010. Production of shocks and struts is expected to begin as early as 2008, but Martens says Asian OEMs also are interested in more complex suspension systems and modules.

“We see these new contracts as the first steps of many long-term opportunites for both companies,” Martens says.

And, while the new JV initially is aimed at supplying Chery, Martens says the company also will eye opportunities to supply other OEMs, as well.

Among the new systems ArvinMeritor is touting:

Years ago, suppliers of brakes and suspension components pitched U.S. auto makers with the idea of supplying built-up brake and suspension modules that combine numerous parts and sub-assemblies. The OEMs were receptive at first, but most have since grown cool to the concept.

This latest announcement follows on the heels of several other new Chery contracts with ArvinMeritor for its door-system technologies. Company officials say more announcements about investments in the Asia/Pacific region will be coming over the next 18 months, including a new venture involving the production of steel wheels.

The supplier also recently broke ground on a new engineering and technical center near Shanghai.

Half of ArvinMeritor's $6.4 billion in sales revenue in 2006 was in North America, with 39% in Europe and only 11% in Asia and other countries. Its drive in Asia/Pacific is aimed at increasing sales to one-third of total revenues and have future sales split evenly between the other two regions.