Chrysler May Export Cars From China
DaimlerChrysler plans to build Chrysler compact cars in China to export to the United States, taking advantage of wages one-18th those of U.S. workers.
DaimlerChrysler is in talks with Fujian Motor Industry Group to form the venture in southeastern China, executives from the two companies said late Wednesday. The entry-level Chrysler model has not yet been developed, said DaimlerChrysler’s China chief, Ruediger Grube, but it could be the first mass-produced Chinese car sold widely in the U.S.
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.
DaimlerChrysler will decide in the second half of this year whether it should proceed with the venture, Grube said.
“It’s not so much a trend as the reality,” said Bob Lutz, General Motors Corp.’s vice chairman. GM plans to make Chevrolet Aveo compact cars in Shanghai for overseas markets. “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 less than $2 an hour, Grube said.
“China has a big advantage where labor costs are concerned,” Grube said.
Adam Jonas, a Morgan Stanley analyst, said the company might be sending a warning shot across the bows of the United Auto Workers union in the United States.
“The costs of making a car in China today are still not competitive when factoring in logistics, the supply network and import tariffs, even though the labor costs are so low,” he said.
DaimlerChrysler has invested $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.
DaimlerChrysler also plans to start building Mercedes-Benz C-Class and E-Class cars in China this year. DaimlerChrysler is not planning to export Mercedes from China, Grube said.
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Bloomberg News and Reuters were used in compiling this report.
