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DC To Use Mercedes Parts In Chryslers

October 16, 2001

DaimlerChrysler AG's Chrysler cars and trucks will use a Mercedes-Benz vehicle-stability system, in what the German automaker called the most extensive parts sharing between the units as it tries to improve earnings.

Richard Schaum, Auburn Hills-based Chrysler Group's executive vice president of vehicle development, wouldn't say when or on what vehicles the third-largest U.S. automaker will use the system. The LX cars that replace the Chrysler 300M and Concorde and Dodge Intrepid in 2004 and the later replacement for the Jeep Grand Cherokee sport-utility vehicle are likely candidates, analysts said.

Using Mercedes systems on Chryslers increases the volume of the components and lowers the company's parts cost, Schaum said. Vehicle-development costs contributed to Chrysler losses this year, and the U.S.-based unit wants to use more Mercedes parts to reduce engineering expenses. Chrysler's turnaround plan calls for breaking even next year and earning a profit in 2003.

"Are you going to save thousands of dollars per car? Probably not," said Jim Hall, an analyst at auto-industry research firm AutoPacific Inc. "But it does allow them to add features to a car without more cost."

Schaum wouldn't say how much Chrysler expects to save by using the Mercedes system. He has estimated that Chrysler could cut about $100 million in engineering costs. Chrysler has said the LX will also have Mercedes axles, steering columns and seat frames.

Chrysler lost $1.38 billion in the first half of this year as sales slowed and the company used incentives to attract buyers. Demand slid further following the September 11th terrorist attacks, and Chrysler followed rivals by implementing no-interest financing to revive sales, increasing incentive costs. The unit predicts it will lose $2 billion to $2.5 billion this year.

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