Chery is in trouble and it loox like US prosecutors will go to the bottom of it. Read on for excellent background article about the case from GlobalTimes, a Chinese government owned magazine:

“China’s largest [independent, domestic] automaker, Chery International, denied charges Monday by US prosecutors who are accusing it of stealing millions of dollars worth of clean energy technology from former engineers of US auto giant General Motors.

The intensified wrangling comes as the US auto industry attempts to recover from poor fiscal performances and shrinking sales.

And analysts are warning Chinese automakers to take intellectual property rights more seriously when competing with their foreign counterparts, as the Chinese firms are vying for more market share worldwide after the country’s car market was crowned the world’s largest last year, surpassing that of the United States.

In a statement e-mailed to the Global Times, Chery, which rolled out its first all-electric car in 2009, denied any involvement in the technology thefts.

“Chery Automobile Co has never been in contact with the Chinese American couples allegedly involved in stealing GM tech secrets,” the statement said.

Du Shanshan and Qin Yu, a Chinese couple who became US citizens, were indicted Thursday in US District Court in Detroit on charges that include conspiring to steal trade secrets related to hybrid ve-hicles from GM and attempting to sell them to Chery. GM claims the stolen information is worth $40 million, media reports said.

Du, a former GM employee, was accused of copying thousands of documents in 2005, five days after getting a severance offer from GM, the AP reported, citing the indictment unsealed Thursday by the court.

Several months after Du left GM, the indictment says, the couple “moved forward on a new business venture to provide hybrid vehicle technology to Chery Automobile.”

“Chery has always been committed to observing and maintaining the rules of IP (intellectual property) protection by the international community. It has obtained more than 4,000 patents for core technologies, including whole vehicle, engines, gearbox and new energies, thanks to its own R&D capability,” the statement said.

Since 2001, Chery started its research and development work worldwide in the field of new energy, the company said on its official website.

GM spokesman Tom Wilkinson was quoted as saying by CNN that “We cooperated with the US attorney’s office in developing the case and will continue to cooperate with them as appropriate.”

Attorneys for the couple could not be reached. The couple had been under scrutiny for years, The New York Times reported. If convicted, they will face up to 20 years in prison with a fine of $250,000, according to US laws.

The Times quoted assistant US Attorney Cathleen Corken as saying that “there is no indication the Chinese benefited.”

“As our auto industry works to find new areas of innovation, such as hybrid technology, we will not tolerate the theft of our trade secrets from foreign competitors,” Barbara McQuade, US attorney for the Eastern District of Michigan, said in a news release, the Times said.

The case comes at a time when Chinese automakers try to buy brands and technology from Western companies amid industry turmoil. However, Chinese auto manufacturers are still believed to be lagging behind their global rivals in terms of technology and design.

The latest theft allegations echo a similar case from 2006. Yu Xiangdong, a former Ford Motor engineer, was charged with copying design details on vehicle components in December 2006, less than a month before quitting Ford.

As China’s largest independent automobile maker, Chery’s rollout of its first all-electric car, the S18, made the company the second in the country to do so, after BYD, China’s leading electric-car maker that renowned investor Warren Buffett is a shareholder in.

Apart from the automotive industry, cases of alleged theft of secrets, involving Chinese and US companies, have also been reported in other sectors, including telecommunications.

John Zeng, a senior market analyst with the Asian Automotive Forecast Service at IHS Global Insight, told the Global Times that foreign media and companies have long been used to wearing blindfolds in perceiving China and Chinese companies.

“Whenever China or Chinese companies make progress in technology, their foreign counterparts accuse China or Chinese companies of stealing,” he said.

Zeng warned that the number of such cases involving the alleged theft of tech secrets in the auto industry will increase in the future as China’s auto industry continues to expand.

Jiang Yong, director of the Economic Security Studies Center at the China Institutes of Contemporary International Relations, said that such theft accusations aren’t uncommon and are usually made by com-panies whose technical capabilities are declining.

He noted that, in order to avoid being targeted by foreign firms with similar accusations, Chinese auto companies need to carefully study the law on IPR protection to prevent crossing the line.

It is often difficult to define IP infringement, as many technologies in the industry are developed to match the ones already in use, so many products bear similarities unless real technological breakthroughs are made, he added.”