Reorganization of Fujian Daimler suspended

　　Everybody held the opinion that reorganization of Fujian Daimler would be completed eventually after the plan got permission from Chinese government. Surprisingly, the deal is likely to be a failure.

　　Industry generally believed that reorganization of Fujian Daimler would be accelerated, but now there is no news about the deal. Information collected by reporters of First Financial Daily indicates reorganization of Fujian Daimler has been completed suspended. In other words, Fujian Daimler may maintain its current shareholder structure in the future.

　　Suspension of reorganization

　　"I also wonder what why suddenly there is no news about reorganization of Fujian Daimler considering that it had been reported a lot before”, said a dealer of Fujian Daimler when was interviewed by First Financial Daily. The dealer of Fujian Daimler also revealed he or she received feedback from Fujian Daimler that the reorganization has been stopped.

　　A person who is close to Fujian Motor confirmed the fact for reporters. “Fujian Motor had reached a framework agreement with Beijing Auto about reorganization of Fujian Daimler, but now the reorganization has been suspended. And Fujian Motor may not sell its share of Fujian Daimler any more”, said this person.

　　In fact, reorganization of Fujian Daimler has been a focus within the industry since last year. As early as the end of July last year, Fujian Motor reached a framework agreement with Beijing Auto about reorganization of Fujian Daimler. According the agreement, Beijing Auto would buy 40% stake of Fujian Motor in Fujian Daimler and consequently Fujian Motor would own 10% stake in Fujian Daimler.

　　Before the end of last year, Beijing Auto conducted a due-diligence investigation on Fujian Motor about reorganization of Fujian Daimler. At that time relevant sides including Fujian Motor believed the deal would eventually succeed. Relevant person at Fujian Daimler pointed out that shareholders would change after reorganization but the deal would have no effect on its production plan.

　　For slow reorganization of Fujian Daimler, the industry originally believed that it was inhibited by unsettled permission. Without permission, the two sides can’t reach agreement on price.

　　Reorganization of Fujian Daimler didn’t go ahead though arrival of permission. Relevant person at Fujian Motor disclosed that the two sides still couldn’t reach agreement on price of the reorganization so Fujian Motor decided to suspend its cooperation with Beijing Auto.

　　Relevant person at Fujian Daimler told reporters that framework agreement between Fujian Motor and Beijing Auto has already expired. Moreover, the two sides also don’t hold any further negotiation on this issue, so the deal is supposed be a failure.

　　“It is difficult to deal with issues including the interests of local government, transaction price and personnel arrangement in cross-regional reorganization. As a new project, disagreement between the two sides may lie on the price”, said Zhang Zhiyong, an auto expert.

　　Maybe maintain the current situation

　　Suspension of Fujian Daimler reorganization made many people surprised. Fujian Daimler will be operated under current shareholder framework despite existence of different ideas between shareholders.

　　One person who is close to Fujian Motor said that Fujian Daimler has already begun on track for higher market acceptance of its products. Once reorganization of Fujian Daimler couldn’t be accelerated without the permission, nevertheless, arrival of the permission helped Fujian Motor build the confidence to continue operating Fujian Daimler.

　　As a luxury brand of commercial vehicles, its scale may be small and it may take Fujian Daimler 2 to 3 years to raise capacity and ultimately achieve virtuous cycle of business operations. However, there is just one manufacturer of luxury commercial vehicles in China, and Fujian Daimler's products have no direct competitors in Chinese car market.

　　The improved market conditions since last year and rising profit of Fujian Motor also give it the confidence to operate Fujian Daimler by itself. Car sales of SOUEAST (another joint venture of Fujian Motor) in 2009 increased by 100% compared with same the period of 2008 and achieved profitability.

　　Indeed, under background involves construction of Fujian Hercynian economic zone, development strategies of Fujian Motor Group are gradually clear. It tends to follow the path of independent development.

　　For Daimler, its desire of forming a big Mercedes concept through reorganization may not come true. Reorganization of Fujian Daimler conducted by Beijing Auto is beneficial to further rationalize the development strategy of Daimler-Benz development in China, so Daimler played an active role in reorganization of Fujian Daimler.

　　Background

　　Fujian Daimler was set up in October 2007 in Fuzhou and the total investment was 249 million euro. Registered capital is 160 million euro with an annual output of 40000 units. Fujian Motor holds 50% stake in it, Daimler holds 33.78% stake in it and ZhongHua holds 16.22% stake in it.

　　In April of this year Fujian Daimler officially launched Viano and Vito. Additionally, Fujian Daimler said another commercial vehicle Sprinter would be produced and sold in Fujian. (Translator: Qinghua Wade)

　　See original Chinese report Please click:

　　http://auto.sohu.com/20100519/n272202175_1.shtml