Chang'an Auto to control smaller rival firm
(Xinhua)
Updated: 2004-12-14 17:14

Changan Auto, Ford's car-making partner in China, will invest $60 million to secure control of a smaller local rival, the company said on Wednesday as the fragmented industry consolidates.

Changan Automobile Co. Ltd. said it would invest 500 million yuan ($60.42 million) in a 50-50 venture with the parent of Shenzhen-listed Jiangling Motors .

Jiangling's state-run parent would inject its 41-percent share of the listed Jiangling unit into the venture of the same name, which will not be directly involved in automobiles but will hold interests ranging from agriculture to handicrafts.

"The deal will raise competitiveness, expand market share and help with our aim of becoming bigger and stronger," Changan said in a statement.

Analysts said that the merger could give Changan about 15 percent of the auto market -- covering everything from cars to buses and tractors.

The complex move is a sign of consolidation in a fragmented industry with over 100 players that is grappling with a protracted downturn this year and next, analysts said. Beijing issued a policy document this summer urging consolidation of the overcrowded auto sector into a strong, homegrown industry that can also expand overseas.

Under terms of the deal, Changan Auto would control five of the joint venture's nine board seats, handing it effective control of the joint venture, which would be publicly listed, the official Securities Times said.

Money earned by the joint venture will be consolidated under listed Changan's accounts, Changan said in a statement.

Jiangling's second largest shareholder is Ford, which owns nearly 30 percent of the company. There was no mention of Ford's involvement in Wednesday's statement.

Changan is China's top maker of minivans and also assembles compact cars with Japan's Suzuki Corp. . It is building a second plant with Ford near Shanghai that will have an eventual capacity of 400,000 units.

Changan posted a nearly 32 percent slide in third quarter earnings, though sales in the first nine months leapt 22 percent to 339,449 units.

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