Changhe, Hafei may merge into Dongan Power

Shanghai, February 27 (Gasgoo.com) Since China Aviation Industry Group Corporation (AVIC) was formed in late 2008, the fates of its auto subsidiaries Changhe Auto, Hafei Auto have been undecided. With the release of the government's new plan for auto industry restructuring, the two automakers are rumored to merge into their auto-parts supplier -- Dongan Power, AVIC's another unit, the 21st Century Business Herald reported today.

Changhe Auto and Hafei Auto are now seen as burdens of AVIC, though the top plane-maker in China has decided to carry on the aircraft and auto manufactures simultaneously. Changhe Auto's unaudited profit losses in 2008 reached 587 billion yuan ($86 billion), and Hafei Auto's business is not much better. As their auto-parts OEM, Dongan Power also has achieved little.

Since mid-2007, French carmaker PSA Peugeot-Citroen and its Chinese venture Dongfeng Peugeot-Citroen have been seeking partnership with Hafei Auto. But the possibility is dimming now as many problems remain unsolved between them.

As an auto-parts subsidiary of AVIC, Dongan Power is a manufacturer of small engines and has its self-developed brands. The company's recent main source of profits is the returns on investment in an engine venture with Mitsubishi Motor (Dongan Mitsubishi). 

AVIC is setting up an auto business division to supervise Changhe Auto, Hafei Auto, Dongan Power and its other auto-related companies. Industry insiders said it is quite possible for Dongan Power to become a platform for restructuring and merging the two car companies.