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Last Updated: Wednesday, 4 July 2007, 08:01 GMT 09:01 UK
US to get Chinese Chrysler cars
Chrysler minivan
Chrysler minivans have been shunned in favour of smaller models
The struggling US Chrysler arm of carmaker DaimlerChrysler has announced plans to develop cheap small cars with Chinese auto firm Chery for export.

The cars produced under the deal could be the first to be made in China and sold in Europe and the US.

The agreement could be a huge boost for Chery amid rising competition to meet China's demand for cars.

The partnership should also improve Chrysler's ability to meet consumer demand for more fuel-efficient cars.

The first car, a Dodge model based on Chery's A1 hatchback, could be available in Latin America or Eastern Europe next year and should be available in the US within two-and-a-half years.

Future models will follow, the companies' said.

The deal will allow Chery to expand its own range into lucrative overseas markets, using Chrysler to help it meet international standards on safety and pollution-control.

It follows DaimlerChrysler agreeing to sell a majority stake in its US Chrysler business to Cerberus Capital Management, a private equity firm, for 5.5bn euros ($7.4bn; 3.7bn).

'Immediate effect'

"Chery's participation in this agreement and their focus on small and sub-compact cars will have a nearly immediate effect on Chrysler Group's offering in the small-vehicle segment," said Chrysler Group's chief executive Tom LaSorda.

Chrysler has suffered in recent years from an over-reliance on sports utility vehicles (SUVs), which have been shunned by increasingly environmentally-aware consumers.

The group booked a loss of 1.46bn euros ($1.98bn; 985m) for the first three months of the year, which included charges associated with the restructuring of the business.

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