A U.S. Car Deal With A Little Chery on Top?

"More important than an immediate production/brand footprint in North America would be Chrysler's dealer footprint, which is extremely difficult and expensive for a new manufacturer to replicate," he wrote. "Conversely, this may be one of the most important reasons GM would make a defensive bid for Chrysler."

Jim Sanfilippo, a senior industry analyst at AMCI, an automotive consulting firm in Bloomfield Hills, Mich., said he didn't expect a firm like Chery to make a significant move into the United States right now.

But, he added, Chinese auto firms could be a serious presence in the United States in as little as three years. He expects them to move not through acquisitions, but by setting up their own operations as Kia and Hyundai did before them.

"They're students of this business, and they've got incredibly able engineers," he said.

That Chery is now included in discussions of Chrysler's future is a major milestone for the provincial company that was founded only nine years ago.

Chery's initial purpose in 1997 was to help the economy of Wuhu, a city about 150 miles west of Shanghai, but even in those early days, Chery was a rebel. According to its official government registration at the time, Chery was just a car parts supplier. Its first assembly line was constructed in secret and in violation of laws that allow only those companies with special licenses to create cars.

The move was daring, though not unheard of in those days, a time when everyone sought to grab a role in an economy that was just starting to take off. Initially, Beijing was livid, but as Chery quickly grew, the central government began to hold it up as a model company for the rest of the nation.

Under the leadership of Yin Tongyao, a native of Anhui (Wuhu's province) who worked at the Volkswagen joint venture for more than 10 years, Chery became a global player.

Yin stacked his top management with overseas Chinese who had previously worked for Ford, General Motors and Chrysler. In 2001, Chery became the first Chinese automaker to sell cars abroad when it sent its first export to Syria.

Chery made international headlines in 2005 when it announced that it had teamed with veteran auto entrepreneur Malcolm Bricklin and Visionary Vehicles. The companies announced that they would sell five lines of cars designed by Chery, 250,000 in total, in the United States by 2007. The deal has since fallen apart.

There has been talk of an initial public offering as early as 2008, but for now Chery essentially remains a state-owned enterprise with strong backing from both the local and central governments.

The Chinese car market is among the most fragmented in the world. According to customs figures, a total of 1,025 firms -- which includes manufacturers as well as trading companies -- exported vehicles, with 600 of them shipping fewer than 10 units abroad. About 173,000 units were exported in 2006, and 300,000 are expected to be shipped this year.

The Chinese government has aggressively supported the expansion of domestic automakers -- its goal is for Chinese cars to make up 10 percent of the world's auto trade in the next decade -- and has introduced measures to protect the image of these cars abroad.

The government has also helped provide financing for the companies' expansion. So, if Chery is looking for a U.S. partner, money isn't expected to be much of a problem.

Tse reported from Washington. Staff researcher Richard Drezen contributed to this report.