Chinese manufacturer Chery had planned to build cars for Chrysler to sell in to North America as early as last year in exchange for a vital cash injection, there’s no secrets there, but with a distinct lack of the engineering talent required to make cars of a quality acceptable to the US market, coupled with US politics and an anti-Chinese bias, the talks were abandoned.

It seems that despite Chrysler hurting, Washington is unwilling to help the car maker if Chrysler’s turnaround plan includes closing local operations while spending millions of dollars to help a Chinese manufacturer build cars that they will in turn sell back in to the home market.

You see unfortunately the US consumer seems to blame China for job losses over the last decade and although the critics don’t mention that inexpensive goods from China lower Americans’ cost of living, or that automation has taken a huge toll on American manufacturing jobs, and while it is now considered the Chery – Chrysler alliance is being made a scapegoat for Chinese – US relations, in the eyes of the politicians at least, the risks of a deal with Chery were too high.

Perhaps it is just the US trying to protect their manufacturing jobs, or perhaps it is a case of history repeating itself for twenty odd years ago much the same could be said of Japanese manufacturers. Japanese automakers were blamed openly for the loss of American factory jobs. Auto workers made sport of smashing Japanese cars with sledgehammers.

Now Japanese automakers are widely embraced in the US. Why? Japan’s automakers invested there. They opened factories and dealerships across the country. They became a strong part of the American economy.

There in lies a lesson for the Chinese, they should follow the same path. Chinese companies need to think globally and start investing in operations in America and Europe instead of holding so much of their operations base (and wealth) at home, and though it is probably too late to win back any hopes of an alliance for Chery and Chrysler, future co-operations could make for stronger operations across foreign shores helping car makers become less vulnerable to economic tough times.

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Chinese auto manufacturer Chery, suffering from the current hard economic times, has started laying off employees and freezing development of some new models.

The state owned company, controlled by the Wuhu city government in Anhui province, admits that whilst such extreme measures have improved its cash flow in the immediate term, long term growth may only come by privatising the company and putting a halt to its so-called “reckless expansion”.

Since establishing itself in 1997, Chery has produced over one million vehicles ranging from small cars to SUVs with a planned expansion in to light commercial and luxury vehicles on the drawing board.

This aggressive pursuit of scale however has stretched Chery’s limited resources to breaking point with supplier sources saying Chery’s cash flow is always tight. Unable to fund new projects with earnings, the company relies heavily on bank loans for financing.

Auto manufacturing is becoming increasingly competitive in China, though state-owned companies are typically slow to respond to changing market needs and conditions. It is considered that privatising Chery can be done through stock listing, management buyout or taking on private shareholders.

Chery has been planning to issue shares on the domestic stock exchange for sometime now, and with the bear stock market in China stalled, privitisation is becoming not only a consideration, but a necessity.

Compared to other Chinese automakers who produce their own brands, Chery has been more severely hurt by weak markets in and outside China with sales down 9 percent year-on-year, or below 275,000 units.

Privitisation is a big step for Chery and one certain to change the face of Chinese automotive industry.

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Chinese car maker Chery automotive is rumoured to be in talks with Ford and private equity firms about financial backing to acquire Swedish-based Volvo from Ford Motor Co. a Chinese business magazine reported yesterday.

The article states that Chery is still in the early stages and has not asked for permission from the government of Anhui, the company’s home province, a legal requirement for such an acquisition to take place.

Both Chery and Ford have declined to comment on the issue. Ford states the companyis more focused on building Volvo rather than selling it. Meanwhile analysts indicate that Volvo could cost Chery more than 30 billion yuan ($4.6 billion), it said.

Chery cars will soon be well known in Australia, following Ateco’s announcement that Chinese cars are only months away from our shores. Chery is a state-owned firm set up by the government of Wuhu city in Anhui province in the 1990s.

Recently it was reported that Renault is also in talks to acquire Volvo.

How will Chinese ownership affect the Swedish brand?

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It’s official. Chinese cars will be here next year. Ateco, the Australian importer of European prestige brands such as Ferrari, Maserati, Alfa Romeo, Citroen and Fiat has just announced plans to import cars made by Chery Automobile Company.

The two companies have been in talks since late 2005 but the distributorship agreement was only executed earlier this month.

“We believe that China represents the future as a source of automotive products which makes this association with Chery a very exciting development for Ateco,” Ateco governing director, Neville Crichton said.

Ateco will import three Chery models to Australia next year, a light and a small passenger car as well as a small SUV. Depending on sales success, there is a good possibility of more models making their way here with Chery expected to expand its range with 38 new models over the next five years.

The SUV is more than likely going to be the Tiggo 3 (pictured above), the light car is still unknown while the small car could look something like this:

The A1 is a great attempt by Chery to enter the small car market. Utilising a front-wheel drive setup, the car was designed by struggling Italian design house Bertone. Currently it’s available with either a 1.1-litre (50kW @ 6000rpm and 90Nm @ 3500rpm) or a 1.3-litre engine (61kW @ 6000rpm and 114Nm @ 3800).

The A1 is only available with a five-speed manual gearbox and returns a fuel economy of around 6L/100km, according to official figures.

A national dealer network is currently in the works and all Chinese cars will be sold and badged as Chery.

The task to establish a new brand will be very difficult. Any early mishaps (e.g. bad ANCAP rating) could potentially damage the reputation of Chery irreparably. Nonetheless, with Ateco’s experience in public relations and marketing, Chery might just stand a chance.

Despite the many negatives we have seen over the last 12 months, with the likes of Chinese manufacturer Brilliance failing miserably in Europe, Chery is arguably the best of the Chinese automakers.

The company started building cars in late 1999 (yes, not that long ago) and managed to sell 1 million cars in its first 8 years of operation. In 2007 it sold 261,000 vehicles domestically and exported another 120,000.

Chery can currently manufacture 650,000 cars a year but plans to expand that to 1 million in the next few years. According to the company, all cars are produced in “ultra modern” factories using “extensive production equipment from overseas, usually Europe”. The company employs about 25,000 people.

It will be interesting to see how Ateco plans to advertise and market Chery next year. The Chinese brand will have a lot to prove and critics will undoubtedly give the company a hard time.

But the real issue is not about mishaps and negative reviews, it’s a core values question, if the price is right, would you buy a Chinese made Chery vehicle?

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