Chrysler moves closer to restarting Jeep production in China

Chrysler’s Jeep is moving closer to resuming production in China for the first time since 2009, but that production will not reduce or substitute for Jeep production in the U.S., Jeep CEO Mike Manley said.

In fact, the brand is boosting production in Detroit, Toledo or Belvidere, Ill., where it is adding 4,000 this year.

More China sales means a healthier Chrysler, Manley said.

“For us to continue the growth of the Jeep brand and therefore be successful because of that, you need to produce locally for the local market,” Manley said in a group interview at the Shanghai Auto Show.

Chrysler signed a deal in January with Guangzhou Auto Group to establish a joint venture. Although the company needs Chinese government approval, Manley said he’s optimistic production can start by the end of 2014.

Jeep is well-known in China because it was the first U.S. automaker to sell vehicles there. Former owner American Motors launched the Beijing Jeep joint venture in 1979 with government-owned Beijing Auto Works. Production began in 1985.

Chrysler bought American Motors in 1987 and continued running Beijing Jeep until early 2009.
Cerberus Capital Management, the private equity fund that owned Chrysler, then exited the venture shortly before Chrysler’s U.S. taxpayer-backed bankruptcy.

Two weeks before the U.S. presidential election last year, Jeep was sucked into what turned out to be one very big misunderstanding. Republican candidate Mitt Romney repeated rumors that Jeep’s plan to resume making SUVs in China would come at the cost jobs in Toledo and Detroit. Chrysler CEO Sergio Marchionne clarified that any production in China would be in addition to Jeep output in the U.S.

Jeep did export 46,000 vehicles in 2012 to China, which surpassed Canada as Jeep’s second-biggest market, Manley said.

Sales in China are limited without local production. Tariffs imposed on imported vehicles and powerful engines, “the majority” of Jeeps in China cost more than $100,000, Manley said.

A fresh wave of Chinese consumers are flocking to crossovers and sport-utility vehicles. Yale Zhang, managing director of Automotive Foresight Shanghai, said the SUV segment will grow from about 15% of China’s market today to 20% in 2015, or from 2 million last year to 3.5 million by 2015.

Competitors are flooding the market with SUVs and crossover vehicles. General Motors recently started selling the Buick Encore, and Ford is introducing the Ford Kuga (Escape) and EcoSport vehicles.

This week at the Shanghai Auto Show, Mercedes-Benz showed the GLA concept vehicle.

For Jeep, Chinese production would reduce shipping costs and bring prices into a competitive range.
Manley said the new Cherokee, which will go on sale in the U.S. by late September, likely will be Jeep’s first vehicle produced in China.

Manley said he hopes to expand Jeep’s China dealer network from about 150 today to 200 by the end of the year. In addition, Jeep already has more than 200 licensed retail stores selling Jeep merchandise, including the Jeep Spirit line of sport clothing.

Owners of Cherokees purchased in the years before the 2009 Beijing Jeep shutdown have formed Jeep clubs, proving that its legacy resonates.

"Awareness of the brand is huge," Manley said.

Courtesy of freep.com