China's Foton denies earlier reports on DaimlerChrysler talks

Shanghai. September 18 (Gasgoo.com) – China's Beiqi Foton Company released a clarifying statement today denying earlier media reports that Chinese government has refused to approve a possible cooperation between Beiqi Foton and Daimler-Chrysler.

"The Economic Observer News reported on September 17 that Foton and Daimler Chrysler's cooperation was postponed due to NDRC's (National Development and Reform Commission) opposition. This report has been quoted by other media outlets, but it is not true," the statement said.

This January, Daimler Chrysler Motor Corporation has reached a share-purchase contract worth 818 million yuan ($105 million) with the Beijing-based Beiqi Foton.

Under the contract, Daimler Chrysler will buy a 24 percent stake from Foton or 297 million shares at 2.75 yuan per share. The investment will make Daimler Chrysler a major shareholder in Beiqi Foton. Daimler Chrysler hopes to produce Benz vehicle in Foton via this investment.

However, the contract has been delay again and again since DaimlerChrysler was acquired by private-equity firm Cerberus and was separated into two companies.

Under Chinese law, foreign automakers are allowed to have not more than two joint ventures to make commercial vehicles and two for passenger cars. Moreover, overseas investors can acquire strategic stakes in publicly traded Chinese companies provided they buy at least a 10 percent stake and hold the stock for three years.

DaimlerChrysler has two partners in China making commercial vehicles, Yaxing Benz and Fujian Motor Industry Group. It also makes Mercedes-Benz sedans and Jeep Cherokee sport utility vehicles with Beijing Automotive Industry Holding, Foton's parent company.

DaimlerChrysler announced plans to withdraw from its Yaxing-Benz Co joint venture this May to better focus on its cooperation with Beiqi Foton, and negotiations between DaimlerChrysler and Foton will continue, a local Chinese newspaper said.

The two sides may first finish the share-purchase deal and then set up a joint venture to produce medium and heavy –duty Benz trucks in future as the policy barrier for DaimlerChrysler has been removed, but if the deal is still not finished before the final deadline, either side can end the contract, said the newspaper.