Guangzhou Auto signs JV deal with Mitsubishi Friday

Source: Gasgoo
[09:03 November 08 2010]
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Guangzhou Automobile Group and Mitsubishi Motors Corporation have signed Friday a memorandum of understanding (MOU) to establish a 50-50 joint venture in Changsha, Hunan, the capital of Hunan Province in south China, National Business Daily reported Friday.

GAC Changfeng Motor Co. Ltd. (600991.SH) will however withdraw from the cooperation with Guangzhou Auto that now holds a 29 percent stake in GAC Changfeng, and is set to tap the auto parts market.

Changfeng Group, a Chinese SUV maker in Hunan Province, and Japanese automaker Mitsubishi Motors, hold a 21.98 percent and 14.59 percent stake in GAC Changfeng respectively.

Executives from Mitsubishi Motors and Guangzhou Auto are reportedly to have arrived in Changsha yesterday afternoon. People on both sides, with knowledge of the matter, also confirmed the information about the MOU, saying they did not expect the thing could happen so quickly.

According to earlier sources, shares of GAC Changfeng had been suspended from trading since October 28 and may resume trading on November 4.

Due to the complexity of the restructuring, specific plans for the restructure between Guangzhou Auto and Mitsubishi Motors were already submitted for consultation by relevant departments in China and have not been finalized yet.

According to sources, both Changfeng Group and Mitsubishi Motors will alien their shares in GAC Changfeng to Guangzhou Auto, which will then recognize that resources to create a new joint venture with Mitsubishi Motors.

In addition, Changfeng Group is said to have signed an agreement with the Hunan government to supply auto parts to the vehicle manufacturers in the province, which analysts said may be the reason the automaker decided to terminate its cooperation with Guangzhou Auto.

By the end of 2015, Hunan expects to have a capacity of more than 2 million vehicles, consisting of 1.8 million sedans.