Denway, Honda in talks over China JV prices, licenses

Denway Motors Ltd., the Chinese partner of Honda Motor Co., said it's in talks with the Japanese automaker over issues affecting their venture which could have a "significant impact" on its financial results.

Topics under discussion include "adjustment on price of its products and change in terms of licenses," although no agreement has been reached, the company said in its earnings filing to the Hong Kong stock exchange yesterday. "The outcome of the negotiation may have a significant impact on the profits of the joint venture, which may in turn have a significant impact on the group's financial results."

Denway's share of the profit from its venture with Honda, which makes the Accord, Fit and City models, was little changed at 1.92 billion yuan ($281 million) last year, according to yesterday's statement. Sales rose 19.4 percent from the previous year to 365,623 units, lagging behind the 53 percent expansion in the nation's overall car sales.

The Hong Kong-based automaker's performance contrasts with rivals including SAIC Motor Corp., which partners General Motors Co. and Volkswagen AG, and FAW Car Co., whose profits and sales have surged as economic growth and government stimulus measures spurred demand.

The expansion in sales at Guangzhou Honda Automobile Co., whose annual production capacity is 360,000 vehicles, was "slightly lower than the nationwide average growth rate as the sedan company has entered in a mature development stage," Denway said in its statement. The venture has set a sales target of 386,000 units this year, 5.5 percent more than in 2009, compared with government forecasts of an 18 percent increase in overall passenger vehicle sales.

Production Bottleneck

Guangzhou Honda "will take proactive measures to tackle technical and production bottleneck to further exploit production capacity," according to the statement.

The company's shares fell 3.35 percent to HK$4.33 yuan in Hong Kong trading yesterday before the earnings announcement. Denway has risen 65 percent in the last 12 months compared with a 452 percent surge in Hong Kong-listed Brilliance China Automotive Holdings Ltd., the Chinese partner of Bayerische Motoren Werke AG, and a 125 percent jump in SAIC, China's largest domestic automaker.

Denway said yesterday its profit declined 8.6 percent last year after it gave money to support the Asian Games which will be held in Guangzhou in November.

Full story