Like everything sold in North America, it’s only a matter of time until manufacturing gets outsourced to China. The beleaguered Chrysler has now announced a deal that will see cars built overseas before being shipped back to the West for sale.
Digital Journal — Being the CEO of a struggling automaker leaves a lot to be desired. You sweat every time you hear the words “Toyota” or “Honda” whispered at a board meeting; tens of thousands of employees’ lives rest in the decisions you make on your Blackberry; and the world’s most offensive four-letter word is constantly rearing its ugly head: cost.
Looking to compete in the small car market in North America, Chrysler has announced a deal with Chery Automobile to build a vehicle in China, then ship it back to North America for sale in the United States. The company says the car will sell for about half the price of their current cheapest model.
According to Bloomberg News, the Dodge model based on Chery’s A1 hatchbacks will begin to ship next year. But Forbes is reporting Chrysler CEO, Tom LaSorda, said they would not hit U.S. shores for two and half years.
The announcement was made by Chery president Yin Tongyao at a press conference in Beijing today. Edmunds.com says the 1.3-litre A1 costs $7,100 USD in China, whereas Chrysler’s current least expensive model in the States is the Dodge Caliber, selling for $13,850 USD. The street price for the A1 has not been announced.
An employee from Chrysler Group’s Belvidere assembly plant puts the finishing touches on a 2007 Jeep Compass. Unions are concerned that Chrysler’s move to manufacture in China will cost a lot of American jobs. – Photo courtesy PRNewsFoto
Chrysler has seen its sales run flat in recent years, as the company relied heavily on SUV sales in an era where buyers are far more environmentally conscious, and competition from foreign automakers has been fierce.
This deal makes Chrysler the first U.S. automaker to import cars from China (and probably not the last), and working with Chery will allow Chrysler to add to its lineup of cars built overseas, allowing the company to compete with less investment. The cars will also sell in South America and Europe.
The deal was approved by DaimlerChrysler board earlier this year, but some still question how it could be affected by the upcoming sale of 80.1 per cent of the company to Cerberus Capital.
Americans now have a decision to make. In the age of Wal-Marts and bargain-price shopping coming to automakers, America must decide if she wants cheap, or home made.
Futhermore, as Reuters journalist Kirby Chien notes:…like the Koreans and Japanese before them, the price advantage enjoyed by Chinese exporters is offset by poor quality, outdated design and the lack of brand recognition.
The fuel economy, price tag and features will be slobberingly attractive to young white-collared professionals, but unions and the anti-outsourcing crowd will no doubt be up in arms. Chrysler is aware of the potential PR disaster this could bring, admitting it will have a lot of work ahead to ease tensions with unions.
But in the age of competition, that “Made in China” sticker is all that matters to a CEO’s bottom line.
