Updated: Chery denies Chrysler deal is in trouble

Updated:China's Chery Auto has denied claims that its deal with DaimlerChrysler to supply a Chinese built minicar to the US and Europe was put on hold. A spokesman for Chery today told Reuters that the deal was progressing, although he failed to elaborate on its current status or whether Chery wants to renegotiate the terms.

DaimlerChrysler’s board has already given the go-ahead, but execs are still waiting for final approval from the Chinese government. The cars will be initially sold under the Chrysler umbrella, most likely as Dodge models. However, the final goal is for Chery to expand its operations in US and European markets where so far it has had little success.

Chrysler remains confident that it will be able to secure a deal with Chery to source the new minicar from China. Despite reports that Chery has been kept in the dark surrounding the announcement of the split of DaimlerChrysler, a spokesman for Chrysler, Mike Aberlich, revealed in an interview with The Detroit News that there’ll be talks with Chery next week, and more in the near future. "We're confident that we're going to get things done, but perhaps we'll need a little extra time for introductions," he assured reporters.

Original: Despite earlier reports that the joint-venture between Chrysler and Chery was still on track, news has surfaced that China’s Chery Auto has halted proceedings following the announcement of the sale of Chrysler to Cerberus last week.

Chery general manager Zhang Li, who spoke with reporters from German financial publication Handelsblatt, mentioned that the project has been put on hold and that Chery execs want to renegotiate the deal.

The original plan was for Chery to build a new small car in China that would eventually be exported to the US and possibly sold under the Dodge label. For Zhang, and the rest of Chery’s board, the Chrysler sale came as a "total surprise" and there hasn’t even been any talks between them and new owners, Cerberus Capital Management.

"We continue to be in talks with Chrysler, but we don't have any contact with the new owners yet," Zhang told reporters. Most analysts believe Chrysler’s longevity will depend on its ability to secure a suitable global partner and the loss of this deal with Chery would be a serious setback.