Chrysler currently has no sub-compact cars--and with gas prices up last year, suffered for its lack of a fuel-economy model. Yesterday, the automaker reported a 7% sales decline for the year.
Chrysler Group chairman and CEO Tom LaSorda, who discussed the deal this week on Chrysler Group's blog site Firehouse.biz, said it makes sense to outsource the so-called "D" segment of the market because it would be too costly for Chrysler Group to make such vehicles itself.
Such deals are not unusual. General Motors' subcompact Chevrolet Aveo is made in Korea via GM Daewoo.
Chrysler expects the new vehicles to go on sale within the next two years under the Jeep, Chrysler or Dodge brand names. The deal must be approved by DaimlerChrysler's supervisory board, and U.S. and European union representatives.
"If you look at the U.S. market, or even in NAFTA, all the B-segment vehicles are being imported from the Asia region," LaSorda said on the blog.
"The major reason is their cost structure and their ability to engineer and design in those segments. And we really cannot compete, nor can any one else, making it in this region."
LaSorda said the deal doesn't mean any loss of jobs to China because "We aren't involved in [that segment] anyway." He said that Chrysler Group's role will be supervisory--overseeing development and product quality.
"Our role here is to ensure that our engineering and design and quality teams are working with Chery along the way to meet the stringent standards, not only in North America but around the world."
LaSorda said the Chrysler-branded vehicles will serve NAFTA and European markets.