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Changan deal creates new Chinese car giant

CHINA'S Changan Automobile Group Co today agreed to take over five auto units of the Aviation Industry Corp of China to form a new industry giant.

Analysts said the deal is the first merger between state-owned auto companies and marks an accelerated industrial restructure designed to rival international competitors.

Chongqing-based Changan Auto, owned by China Ordance Equipment Group Corporation (COEGC), will transfer 23 percent of its stake to AVIC for AVIC's stakes in its auto units.

These include Harbin Hafei Automobile Industry Group, Changhe Automobile, Dongan Power, Changhe Suzuki and Dongan Mitsubishi.

The assets transfer, signed yesterday in Beijing, will allow AVIC to have a 23 percent stake in the new Changan Auto Group and COEGC to take the remaining 77 percent holdings. Financial details were not revealed.

After the deal, the new Chang'an Group will be able to make 2.2 million vehicles a year through its nine production bases and 21 car manufacturing factories nationwide. The Chinese partner of Ford Motor Corp earlier expected its sales would exceed 2 million units by this year.

"We aim to boost sales to over 2.6 million units by 2012 and further lift sales to 5 million units by 2020," said Xu Bin, general manager of COEGC.

The deal is as part of a wider shake-up of China's auto industry to create domestic champions to compete with overseas car makers.


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