German-US auto giant DaimlerChrysler AG Monday signed a long-awaited framework agreement formalizing strategic co-operation with Beijing Automotive Industry Holding Co (BAIC) to produce Mercedes-Benz sedans and commercial vehicles in Beijing.

New Mercedes Benz vehicles stand in a show room of the DaimlerChrysler branch in Munich. DaimlerChrysler Monday signed a joint venture deal with Chinese manufacturer BAIC to build Mercedes vehicles in China. [yahoo.com]

Investment co-operation projects between the two companies will total 1 billion euros (US$1.09 billion).

Each of the two companies will contribute 50 per cent, officials of DaimlerChrysler said.

"This is a very essential part of DaimlerChrysler's long-term strategy in China," Juergen Schrempp, the auto giant's chairman said at the signing ceremony Monday in Beijing.

The accord is also a new important step to revive BAIC through co-operation with foreign partners.

Mercedes-Benz E and C-class sedans will be introduced in Beijing Jeep, the existing joint venture between DaimlerChrysler and BAIC, the agreement said.

The joint venture will start to produce the Mercedes-Benz sedans in 2005, said Roman Fischer, chief executive officer of Beijing Jeep.

"The annual output of the Mercedes-Benz sedans will reach 25,000 units... and will control more than 10 per cent of China's luxury sedan market by 2012," Fischer predicted to reporters.

Beijing Jeep is producing Chrysler's Grand Cherokee and Jeep 2500, and the Pajero Sport utility vehicle for Japan's Mitsubishi Motor Corp, 37.3 per cent owned by DaimlerChrysler.

The joint-venture project will add a new plant in Beijing for the production of the Mercedes-Benz sedans, according to officials of Beijing Jeep.

China's luxury sedan market is mainly controlled by Audi of German Volkswagen Group, which is making its A6 and A4 sedans at a joint venture plant in Northeast China's Jilin Province.

Premier Wen Jiabao (R) meets DaimlerChrysler CEO Juergen Schrempp in Beijing Monday, Septemter 8, 2003. DaimlerChrysler AG and Beijing Automotive Industry Holding Co. announced Monday a US$1.1 billion deal that will allow China to start producing Mercedes sedans. [xinhua]

Automaker BMW, another German luxury vehicle firm, will begin assembling its 3 series sedans in a joint venture in Northeast China's Liaoning Province. According to the agreement between DaimlerChrysler and BAIC, the German-US automaker will introduce Mercedes-Benz's heavy-duty trucks into Beiqi Foton Motor Co, a wholly-owned affiliate of BAIC.

DaimlerChrysler will form a joint venture with Beiqi Foton to produce the Mercedes-Benz trucks, said company officials.

The Mercedes-Benz's heavy-duty engine technologies and key components will also be introduced into Beiqi Foton.

Swedish Volvo Truck Corp, Mercedes-Benz's major rival in the global heavy-duty truck market, clinched a deal with China National Heavy-duty Truck Corp to set up a US$193 million joint venture in East China's Shandong Province.

Outside co-operation with BAIC, DaimlerChrysler will also start a Mercedes-Benz bus joint-venture programme in East China's Jiangsu Province and a technical-licensing production project of its Setra coaches in East China's Anhui Province.

BAIC has a joint venture with South Korea's Hyundai Motor Co - 10 per cent owned by DaimlerChrysler - to produce Sonata sedans.

BAIC, which experienced losses over the past four years, reported 961 million yuan (US$116 million) in profits during the first seven months this year, boosted by robust sales growth.

The company sold 178,000 vehicles during the period, up 87.9 per cent from a year earlier.

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