Feb. 28, 2007 (China Knowledge) – The board of the DaimlerChrysler AG said on Tuesday that it has approved an alliance between its Chrysler Group unit and China's Chery Automobile Co. aimed at the growing market for smaller cars.

Under the deal, which would not include an equity investment, Chery would build vehicles under Chrysler's brand names for sale in the U.S. and Europe, DaimlerChrysler said in a statement.

Both parties had in December agreed on a plan for the Chinese carmaker to build small cars that would be sold globally and be based on an existing model that would be modified jointly by Chrysler and Chery engineers.

The deal is still awaiting approval from China's government. The deal is expected to be finalized in late March.

Media reports yesterday tip FAW Group, China’s biggest carmaker, as one of the candidates to purchase part, or the whole of Chrysler, DaimlerChrysler’s loss-making unit. Chrysler earlier this month announced that it lost US$1.475 billion in 2006 and said it expects losses to continue through 2007. Parent DaimlerChrysler, however, earned US$4.26 billion in 2006.