DaimlerChrysler AG, the world's fifth-largest automaker, said the Chinese government has approved a plan for the German company to sign a 1-billion-Euro (US$1.2 billion) contract to build Mercedes-Benz cars in China in a partnership with Beijing Automotive Industry Holding Co.

DaimlerChrysler will build as many as 25,000 Mercedes E-Class and C-Class models in Beijing, the Stuttgart, Germany, based carmaker said. The plan was approved by the Chinese National Development and Reform Commission and announced by Chinese Prime Minister Wen Jiabao during a visit to Berlin.

"Building a production facility for Mercedes-Benz passenger cars in China is a decisive factor for our Asian strategy," Chief Executive Juergen Schrempp said. Schrempp ironed out details of the plan during a recent visit to Beijing.

The automaker last month pulled out of a US$6.4 billion plan to rescue its Tokyo-based Mitsubishi Motors affiliate, scuttling its existing Asian strategy. DaimlerChrysler pursued expansion in Asia and sought to cut production costs at its Chrysler unit in the US and Smart unit in Europe by sharing parts.

DaimlerChrysler also faces a threat to its planned truck venture with Hyundai Motor Co., South Korea's largest automaker, which said on April 26 that it is in talks to change its alliance with the German company. DaimlerChrysler owns 10.5 percent of Hyundai.

The German company also said that it plans to cooperate with Beiqi Foton Motor Corp. to build heavy trucks as well as motors and components at Beiqi's factory in Beijing.

Schrempp tried to build a global car company with the US$36 billion purchase of Chrysler in 1998 and a stake in Mitsubishi Motors two years later. The supervisory board derailed that strategy last month with the decision against further support for the Japanese affiliate.

(China Daily May 9, 2004)