ArvinMeritor clinches export tie with Chery

U.S. auto component supplier Arvin Meritor said on Monday it had won a contract to supply shock absorbers to China's No. 4 automaker, Chery Automobile Co, and was building a new factory in China to make those parts for Chery and potentially other automakers for export.

Phil Martens, who heads light-vehicle sales for ArvinMeritor, said the new factory in Wuhu was already under construction and would begin production at the end of this year.

"The venture is such that we can manufacture products for sale to other customers world-wide. The design of the Chery shock is our common worldwide design," Martens told Reuters.

ArvinMeritor said its contract with Chery covered the supply of 10 million shock and strut assembly units over five years. The Troy, Michigan-based supplier does not disclose the monetary value of its contracts.

"It will start in the fourth quarter but really hit full production in the first quarter next year," Martens said of the joint-venture plant.

Martens, speaking on the sidelines of the Beijing Auto Show, said the new ArvinMeritor arrangement with Chery reflected a trend toward automakers sourcing more parts in China in a bid to contain costs. The companies aim to supply the fast-growing local market while also capturing savings by exporting the same parts to assembly plants in overseas markets.

ArvinMeritor is looking for export sales opportunities for the shock absorbers it builds in China, since the part is small enough so that shipping costs do not outweigh the savings on labor, Martens said.

Separately, ArvinMeritor said it had been awarded to supply some 2 million window motors to Hyundai Motor Co for its mid-size Elantra sedan, a popular taxi model in Beijing. ArvinMertitor said it would make the new motors at a plant for the Elantra that the Korean automaker assembles in China.

ArvinMeritor, which also supplies components for heavier commercial vehicles, has set a goal of generating $1 billion in new sales in Asia and to Asian automakers within five years.

Chery has targeted growth over 25 percent this year, outstripping a market widely seen gaining by about 15 percent. The Chinese automaker has also been negotiating with privately held Chrysler LLC to export a subcompact car under one of the Chrysler brands.