DaimlerChrysler Drives Toward Asia

I don't know about you, but I think this first full week of 2007 could be an interesting period for those attuned to the trials and tribulations of the automakers. Among other things, it may provide some indication of which of the Big Three will recover in 2007 (and beyond) to post meaningful profits and challenge Toyota's (NYSE: TM  ) supremacy in the world of automobile manufacturing.

The venue for General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and DaimlerChrysler (NYSE: DCX  ) to provide a first glimpse of their plans and product offerings is the North American International Auto Show, which is currently taking place in Detroit. At this point, I'm not perspicacious enough to bet on one or another of the companies to emerge victorious in the car wars -- for all I know, all three may ultimately be strengthened into profitability -- but I am particularly intrigued by some of the occurrences at DaimlerChrysler, both before and during auto show week.

One of the company's already announced approaches to boosting sales is to go west . . . to the East. Late last week, management said it would materially expand its production in Asia. Tom LaSorda, president and CEO of DaimlerChrysler AG's Chrysler Group, is optimistic about prospects in both Asia and South America. In 2006, Chrysler's sales in non-U.S. markets grew by 6.6%, with Europe recording a 20% increase. U.S. sales for the unit were down about 7% for the year.

If you look closely at DaimlerChrysler's Asian incursion, you'll find several subsets. For instance, the Chrysler Group has announced an expansion of its production in China and Taiwan, in part through a joint venture with China Motor Corp. under which a cargo van will be built in Taiwan for sale in Mexico. The deal also extends a long-term partnership with CMC, which currently builds the Chrysler Town & Country minivan in Taiwan. And Chrysler has also clinched a deal with China's Chery Automobile Co. to debut and produce a new small car for export to Europe and the U.S.

At the same time, Chrysler's sibling, Mercedes-Benz, will manufacture vans in China through joint ventures with Fujian Auto Industry Group and China Motor Corp. The three companies have invested $262 million in the project and are aiming to produce 40,000 vehicles per year.

There remain other subplots afoot at DaimlerChrysler in Detroit this week, not the least of which is the question of LaSorda's staying power as CEO of the Chrysler unit following a 2006 inventory expansion snafu in North America. And it appears that by February, DaimlerChrysler AG will unveil its restructuring plan, one target of which will be a five-year doubling of the company's sales outside North America.

And so the beat goes on at DaimlerChrysler as it attempts to return to profitability following an expected loss of $1.3 billion for 2006. I frankly am intrigued by this flurry of manufacturing plans in markets outside the U.S., since it appears that any automobile manufacturer must be truly international to flourish in the changing world of car production and sales. But despite this activity and GM's leadership of the Dow Jones Industrial Average in 2006, I think it best to stand on the sidelines as the Big Three attempt to right themselves.

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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions and comments. The Fool's disclosure policy propped her up in the back yard on concrete blocks for a new clutch plate and a new set of shocks.


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