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Mercedes to Assemble Cars in China

Announcement comes as executives of parent firm Daimler tackle problems with its Chrysler division.

September 09, 2003|From Associated Press

FRANKFURT, Germany — DaimlerChrysler's senior managers met Monday amid new worries about its Chrysler division, while the automaker unveiled a major deal to start producing Mercedes sedans in China.

Chrysler spokesman Ken Levy said the meeting of top executives, which came ahead of the Frankfurt International Auto Show, was a regularly scheduled event.

Levy refused to discuss details and said news reports that fresh restructuring steps would be decided amounted to speculation.

But Chrysler will have "a difficult task" to reach its revised target of a small operating profit this year, DaimlerChrysler Chief Executive Juergen Schrempp was quoted as saying in this week's Der Spiegel magazine.

Adding to the parent company's woes was a report that worldwide unit sales of its Mercedes Car Group fell 7.6% in August, depressed by slumping demand for its passenger cars. Worldwide sales for the month fell to 87,700 from 94,900 in the comparable period last year, the company said.

In China, the automaker displayed a more confident stance, announcing a $1.1-billion deal with Beijing Automotive Industry Holding Co. to target increasingly affluent Chinese with locally made Mercedes cars.

The undertaking expands an alliance with its Chinese partner of 20 years and exemplifies how foreign automakers are stepping in to shore up ailing state-owned Chinese companies as competition for the country's huge market heats up.

"The strategic cooperation between DaimlerChrysler and Beijing Automotive is a new wave of strategic restructuring of Beijing's automotive industry in the face of domestic and international competition," the companies said in a joint statement.

DaimlerChrysler's move puts it in competition with longtime rival BMW, which plans to tap the top end of China's automotive market through a 50-50 joint venture with Bermuda-registered Brilliance China to produce its 3-series and 5-series models.

DaimlerChrysler sold more than 8,000 Mercedes Benz sedans imported to China in 2002 and the company expects to sell as many as 10,000 vehicles in 2003. BMW last year sold 6,700 imported models.

Stuttgart, Germany-based DaimlerChrysler is also betting on the medium and heavy duty truck market in China.

DaimlerChrysler shares fell 2 cents to close at $39.05 on the New York Stock Exchange.

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