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US car makers target China

190608, Beijing. An export deal signed between China and three major United States car makers has underlined the importance of the Chinese market to the struggling US auto industry.

During a high-level economic summit between Chinese and US officials, attended by Chinese Vice Premier Wang Qishan, General Motors, Ford and Chrysler agreed to ship a combined US$2 billion in vehicles, part kits and machinery to their ventures in China.

Under the deal signed during the Sino-US Strategic Economic Dialogue in Maryland, GM is to sell and export US$1 billion worth of vehicles, car components and machinery to its Chinese venture, Shanghai General Motors, up to the end of 2010.

Ford will also send 30,000 US-made vehicles and supply transmissions to domestic venture Chang'an Ford Mazda Automobile with a total value of US$800 million.

Chrysler will ship US$400 million in Jeep vehicles.

Record oil prices, at up to US$130 a barrel, are leaving US makers battling with declining sales at home as consumers shift focus to more fuel efficient models from Japan.

General Motors and Ford have been adding capacity and bringing in new models to China as their interest in emerging markets grows.

"It is not a very big deal in a commercial sense when compared with US$2.6-billion spare parts and complete vehicles imported on average per month in the first four months of this year,'' said Jane Ye, analyst of Asia-Pacific Auto & Infrastructure Research from Cazenove Asia Ltd, a consulting firm.

"On the other hand, China is a market which provides both decent volume and reasonable margins, becoming strategically important to every auto giant given that it is hard for them to make money elsewhere," she added.

"This will lead to fierce competition in our domestic auto market."

Vehicle sales in China rose 21.84 percent to 8.79 million units last year, making it the world's second largest auto market after the US Sales are predicted to hit 10 million units this year.

Under the deal, GM plans to export its Cadillac luxury sedan and Chrysler will ship its Jeep SUVs to China. Ford has not decided which models will be sent to China.

"In most cases, US-made vehicles are dubbed gas-guzzlers. Given the increasing possibility of rising fuel prices, we are quite cautious over the potential sales performance of US-imported vehicles," noted Lin Huaibin, senior market analyst from Global Insight Inc.

"In addition, taking into account the serious financial status that the Big 3 are facing, the scale of the deal is far from enough to get US car makers out of trouble," he added.

US$1b sales

General Motors Corp is to sell and export US$1 billion worth of vehicles, component kits, machinery and equipment to one of its Chinese partners, Shanghai General Motors, up to the end of 2010. The exported vehicles will carry the Cadillac brand.

30,000 vehicles

Ford Motor Corp is planning to sell more than 30,000 US-made vehicles to China beginning next year. It will also supply transmission components and parts to its joint venture, Chang'an Ford Mazda Automobile Co Ltd. The total deal is worth US$800 million.

US$400m deal

Michigan-based Chrysler is expected to ship US$400 million worth of vehicles under its Jeep brand to China. The US company's commitment runs to the end of 2009.

Source: Shanghai Daily.