Chery seeks Kokomo transaxle line

A Kokomo transaxle line could be headed to China if Chrysler and Chery Automobile Co. can reach an agreement.

A report published in AutoWeek Monday said Chery wants to purchase the four-speed line and ship it to China where it would be installed in compact cars. The report was confirmed by some Chery officials and two suppliers.

The report came as a surprise to United Auto Workers Local 685 officials.

"No, we haven't (been contacted)," vice president Craig Smith said. "I have no clue what that's about. If they've approached somebody, then that's higher than I am."

Chrysler spokesperson Michelle Tinson said the automaker has an ongoing relationship and confirmed the company is in talks with Chery.

"We are talking to Chery," Tinson said, "but we can't disclose any of the specifics we are having at this time."

The report says Chrysler would replace the line with a dual-clutch transaxle. Chrysler is in talks with Getrag, a German company, to form a joint venture that would build the dual clutch system, possibly at a facility near Kokomo.

Chery believes it must have an automatic transmission in vehicles it could ship to the U.S., something that could happen as early as 2010.

"For the U.S. market, an automatic transmission is a must," a Chery engineer told AutoWeek.

Chrysler Group president Tom Lasorda announced earlier this month that Chrysler and Chery have signed a letter of intent, allowing the company to distribute the Chinese-made automobiles in the NAFTA Region - America, Canada and Mexico - as well as Europe.

The agreement needs the approval of DaimlerChrysler Supervisory Board and Chinese officials.

"Being able to partner with Chery represents a long-term solution to the challenges of how to profitably compete in the small vehicle segment," Lasorda was quoted in the Chrysler release. "This supply partnership is part of a new business model that is allowing us to introduce all-new products more quickly, with less capital spending. This announcement reflects the realities of a global industry and DaimlerChrysler's need to remain competitive in all segments."

In the announcement of the letter of intent, Chrysler officials acknowledged that the Chery vehicles would fill a need in the company's lineup.

They "will attract new customers in two segments in which the company doesn't currently compete: very young buyers and entry-level price-point buyers," the released explained.

Chery, which sold 302,478 vehicles in 2006, was founded in 1997 and is largest exporter of Chinese-produced vehicles.