SAIC, Shanghai Electric consider alliance

SAIC Motor Corp and Shanghai Electric Group Co., parent companies to Shanghai Auto and Shanghai Diesel respectively, are in initial talks on a possible alliance in engine business, according to a Reuter’s report earlier this week.

There were plans previously for SAIC to buy Shanghai Diesel, but disagreements with Shanghai Electric left plans on hold, the report said.

Analysts believe that cooperation between both companies, with or without an equity deal, would bring benefits to both companies. While Shanghai Diesel could contribute to Shanghai Auto's commercial vehicle business, the former would also gain by having a tie-up with a major automaker.

Shanghai Electric has more than 4,000 employees currently. It has been a joint-stock listed company since 1993 with total assets of RMB 3.7 billion, specializing in diesel engines, fuel engines and diesel alternators. The company posts sales revenue of RMB2.98 billion (62,416 units) in 2006, down 6.3% year on year.