Chrysler renews search for China partner: sources

DETROIT/SHANGHAI Wed Aug 26, 2009 4:27pm EDT

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DETROIT/SHANGHAI (Reuters) - Just two months out of bankruptcy, Chrysler Group has renewed the hunt for a manufacturing partner in China as it prepares to revamp its product lineup under the control of Italy's Fiat SpA (FIA.MI), three people with knowledge of the discussions said.

In recent weeks, representatives of Fiat and Chrysler have sounded out Chinese automakers about a partnership that would involve one of those companies manufacturing a vehicle for the Chinese market based on a Chrysler platform, the sources said.

Fiat had no immediate comment.

Chrysler spokesman Gualberto Ranieri said China would be a crucial market for the No. 3 U.S. automaker but that no deal with a Chinese partner had been signed.

"China is an extremely important market for Chrysler to get into and there is great interest in that market," he said.

Two people familiar with the preliminary discussions in China said Chrysler had expressed specific interest in finding a Chinese manufacturing partner for the platform used to manufacture its Jeep Compass vehicle.

That platform -- known as Chrysler's C-platform -- also forms the basis for the Dodge Caliber and Jeep Patriot.

Last year, Chrysler had attempted to clinch a deal with Canadian auto parts group Magna International MGa.TO and Russian automaker GAZ centered on that platform and targeting the Russian market, executives have said.

Chrysler's renewed attempt to find a partner in China comes as controlling partner Fiat searches for its own way into the rapidly growing Asian car market where it has almost no presence now.

Fiat's joint venture partner Guangzhou Auto was one of the companies approached by Chrysler representatives, according to one of the sources, who asked not to be named because of the confidential nature of the talks.

Fiat signed a joint venture with Guangzhou in July. The Chinese automaker also has joint ventures with Honda Motor Co (7267.T) and Toyota Motor Corp (7203.T).

Chrysler representatives also visited Changfeng Auto in Hunan to discuss the possibility of selling engine models to Changfeng or having the Chinese automaker start local production of a Chrysler model, according to a source with direct knowledge of those talks.

Changfeng, an SUV-maker that had also been approached by General Motors Co GM.UL as a potential investor for Hummer, has not agreed to local production and has no interest in acquiring Chrysler assets, the person said.

Chrysler emerged from a U.S-government financed bankruptcy on June 10 under a management team reporting to Fiat Chief Executive Sergio Marchionne.

Chrysler currently sells four Jeep models in China, but all of those are imported from North America.

In addition to the Jeep Grand Cherokee, Commander, Wrangler and Compass, Chrysler also markets the Dodge Caliber and Journey in China and the Chrysler Sebring and 300C sedans, the Grand Voyager and the PT Cruiser.

For much of 2008, when it was still owned by private equity firm Cerberus Capital Management, senior Chrysler management has searched for a buyer or partner for all or parts of the struggling automaker.

Those ultimately failed talks involved major automakers including GM, Hyundai Motor Co (005380.KS), Fiat and Nissan Motor (7201.T) and potential partners in the fast-growing markets of China and Russia.

Early this year, Chrysler had discussions over potential asset sales with Beijing Automotive Industry Holding Co, Tempco International Group, Hawtai Automobile and Chery Automobile Co, according to an affidavit in its bankruptcy case.

(Additional reporting by Kevin Krolicki in Detroit; Editing by Patrick Fitzgibbons and Richard Chang)

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