Thursday, February 15, 2007

Chrysler's Problems May Open The Path For A Chinese Automaker Into the U.S.

When Daimler purchased Chrysler for $40 billion dollars it was expected to give the German automaker an additional source of profit as well as a path for more Daimler produced vehicles. Instead, Daimler simply purchased a huge financial drag on their international automobile enterprise, that Daimler may even consider cutting free and selling in the near future. No real American interests exist to purchase what is seen as a corporation in the same declining mess as both Ford and GM. This leaves either Renault of France or some Chinese automobile maker as the most likely to attempt to purchase Chrysler and turn the company around.

Renault's attempts at a toehold in the American marketplace have always ended in failure in the past, despite a good attempt to organize a dealer network with a great in-stock parts inventory for customer support. 1960's and early 70's Renaults featured replacable engine cylinder sleeves that made an engine overhaul far cheaper and easier than most brands that had to be rebored during a major overhaul, yet American buyers never warmed to Renault products, with most of the older models seriously underpowered and really built for European high gas price markets. Even the 1980's attempt to purchase a 49% share of American Motors did little good for either company, and if anything was the final event that led to the collapse and final purchase of the company by Chrysler.

Chinese companies have proven themselves master at buying the collapsed financial assets of other Western companies and turning these companies around financially, avoiding all the upstart difficulties of building an entirely new company from the ground up. And now that Chrysler is probably worth less than half of the $40 billion purchase price by Daimler, the price seems about right for a wealthy Chinese company to make this company the latest Chinese venture to turn around and to gain a place in the U.S. market for Chinese automobiles.

Chery in China has seen amazing sales and production growth and is supposed to manufacture a new small car for Chrysler, the Dodge Hornet. But a company like Chery may be in just the right position to consider a purchase bid for Chrysler and go full bore at expanding into the U.S. market in more than just producing a small import for Chrysler to market in it's still powerful number of existing dealers in their marketing network.


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