DaimlerChrysler AG is reportedly in talks with Chery Automobile Corp about building a new compact car in China.

The world's fifth largest automaker has started discussions with Chery, one of China's leading private carmakers, to assemble a new Chyrsler-branded economy cars in China that would be sold internationally, but not in the United States, according to Automotive News, which cites a supplier to Chery.

DaimlerChrysler would neither deny or confirm the report yesterday.

"We are talking to several potential partners for a B class vehicle, which we are considering (similar to the Dodge Hornet concept shown at the Geneva Motor Show) for international (non-US) markets," a company spokesperson wrote in an e-mail response to questions about the report yesterday. "But we are not officially identifying any of those manufacturers."

If completed, the deal would lead to DaimlerChrysler's first compact car built in China. The company currently manufactures the Beijing Jeep and Mercedes-Benz E and C-class passenger cars in China in cooperation with Beijing Automotive Industry Holding Company Ltd.

Wuhu, Anhui Province-based Chery, specializes in building low price compact cars, and previously sourced auto parts for Chrysler.

DaimlerChrysler is investing 1.2 billion euros (US$1.5 billion) with various partners to expand sales and local production of passenger cars and commercial vehicles, as well as developing vehicle financing in China.

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