Fiat Teams Up With Chinese Carmaker. A Chrysler Connection?

(MoneyWatch)  If the name "Chrysler" evokes images of rust belt factories, it's time to clear your head of outmoded notions. Today's company, having emerged from bankruptcy, is now part of a much-larger conglomerate with global interests.

That was underscored this week when Fiat's Sergio Marchionne announced a 50-50 joint venture with Chinese carmaker Guangzhou Automobile Group to build cars and powertrains for the local market. The new entity will build $550 million production facilities in Hunan Province, where it could be eligible for central government development assistance. The joint entity will start making what it described as models "equipped with the latest in engine and transmission technology in response to the Chinese government's requirement to develop fuel-efficient, low-emission vehicles" in the second half of 2011. Production capacity could go as high as 250,000, plus 300,000 engines.

This deal does not directly affect Chrysler now, but it could in the future if Chinese cars establish a beachhead in the U.S. According to a Fiat spokesman, Richard Gadeselli, "This agreement is purely for Fiat-branded vehicles for the Chinese market." Pressed further on this, he emphasized again that the deal is "solely" for China. But fuel-efficient small cars made in China could be sold here, just as rebadged Fiats will. Fiat does not currently have a Chinese partner, though it had one until 2007 with Nanjing Auto. A planned joint venture with Chery Automobile went sour in March.

Fiat says the first vehicle to be produced by the joint agreement will be the C-segment Fiat Linea sedan, and the first engines the Fire 1.41-liter, 120-horsepower and 150-horsepower T-Jet. The Linea (see picture above) is a sleek-looking, aerodynamic sedan with Audi overtones and could be a sophisticated entry into the Chinese market.

Chinese deals are the thing today. As reported yesterday, ECOtality has signed an agreement to build electric vehicle charging stations in China, and a relaunched Detroit Electric says it will build cars (featuring its own battery drivetrain) in a joint venture with Donfeng Motor Company. "This cooperation with Donfeng allows us to work closely with a strong partner in China to explore various ways to enter the world's largest vehicle market," says Albert Lam, chairman and CEO of Detroit Electric.