SAIC, Nanjing Auto Signed Agreement on Strategic Alliance

Shanghai Automotive Industry Corporation Group (SAIC) and Yuejin Group, the parent company of Nanjing Auto, signed a letter of intent on cooperation last Friday. The two would establish a joint working team to discuss a complete union ranging from auto parts to auto-related services. 

SAIC said the tie-up will help realize the central government's plan to develop the Yangtze River delta area. Furthermore, the fact that Shanghai and Nanjing are only 300 kilometers away from each other makes the deal more convenient.

The cooperation was also achieved in accordance with the China's industrial policy for the auto sector with the intention of integrating the resources of the two auto producers and improving the country's ability to develop home-grown auto brands, a SAIC official said.

It is a win-win strategy for both automakers. SAIC, a partner of Volkswagen AG and General Motors that topped the sales list in the domestic market last year, with sales of 1.34 million, announced it would issue eight billion yuan (US$1.06 billion) in convertible bonds to fund expansion and acquisitions. NAC would be able to provide a variety of car models, including a total of 120 models for commercial vehicles out of its cooperation with the Italian auto giant Fiat, for future research development.

If the two reached the final agreement on the merger, there would emerge a giant auto producer at in the Yangtze Delta region of China with annual sale of two million by 2010.