Dongfeng and Fujian Motor to sign merger agreement

Gasgoo.com (Shanghai May 16) - Dongfeng Motor and Fujian Motor are scheduled to sign a merger agreement in Fuzhou, Fujian tomorrow, the National Business Daily reported today. According to various sources, Dongfeng will integrate FJ Motors' passenger automobile businesses, which include subsidiary companies Soueast Motor and NLM Motor, but not interfere with its commercial vehicle businesses, such as King Long and Fujian Daimler.

"We will officially announce specific details on Thursday," a source from Dongfeng stated. In anticipation of the agreement, trading of Dongfeng's stock was halted earlier this week.

Rumors that FJ Motor would be integrated into Dongfeng appeared as early as last May, however no concrete plans had been revealed until now. In August of that year, FJ Motor subsidiary NLM gained approval from the National Development and Reform Commission to manufacture microvans and engines. Many in the industry suggested that Dongfeng played a major role in helping push along FJ Motor's proposal. Furthermore, the approval also signified the government's endorsement of Dongfeng's plans to acquire FJ Motor's passenger automobile division. However, FJ Motor rebuked any such rumors, with the company making an official announcement last December in which it denied that there were any such "major acquisition plans" in the works.

Zhong Shixiang, an automotive industry analyst, points out that FJ Motor's passenger automobile business has been its major shortcoming. "FJ Motor's internal relationships between its stockholders are rather complex, meaning that full-scale integration will be very difficult to complete," Mr. Zhong said, adding that he believes this is the reason Dongfeng is first targeting its relatively weak and small passenger automobile business.

According to its recently announced mid-term business strategy, Dongfeng Motor aims to sell three million own brand vehicles by 2016, with 300,000 of those sales to be made in overseas markets.