Fiat quits Nanjing car JV in China

MILAN/BEIJING (Reuters) - Italy's Fiat said it had pulled out of a money-losing Chinese joint venture partner Nanjing Automobile after the firm merged with bigger Chinese autos group SAIC Motor.

Fiat has been unhappy with Nanjing Auto's level of commitment to the venture, and raised the possibility of finding another partner to make passenger cars in China, the world's second biggest market.

The venture, known as NAC, had been losing money for years and selling far fewer cars than its competitors.

"The decision gives us total freedom of action to concentrate on the restructuring of our automotive business in China," Fiat CEO Sergio Marchionne said in a statement.

The combination of Nanjing and SAIC, long expected, follows government calls for the creation of a national champion to challenge foreign automakers in China.

SAIC has ventures with General Motors and with Germany's Volkswagen AG, making them the biggest sellers in the country with combined sales of 441,584 units or 14 percent of the market in the first half of the year.

Although Fiat's truck division, Iveco, has a van venture with Nanjing, and another one for trucks with SAIC, an Iveco executive has said a merger between the two Chinese partners would help simplify its relationship with them.

Collaboration in vans, parts

In a joint statement with Nanjing on Wednesday, Fiat said it would sell its 50 percent stake in the venture to Nanjing for an undisclosed amount. But it would keep working with Nanjing in making vans and parts.

"Although their collaboration in the passenger cars sector has come to an end, the long-standing cooperation between the two groups will continue," read the statement.

The venture's failure has raised doubts among analysts about Fiat's ability to meet its target of selling 300,000 units in China by 2010.

In 2006, it sold 31,300 cars, short of Fiat's target of 40,000 for the year and far below those enjoyed by SAIC and its U.S. and German partners.

Fiat's concerns grew when Nanjing began working on the relaunch of the MG sports car brand after buying it from Britain's failed MG Rover. It said Nanjing was being distracted from its commitments to the venture.

Meanwhile, another Chinese manufacturer, Chery Automobiles, has appeared as the likely successor to Nanjing as a partner for Fiat in the passenger car segment in China.

It is setting up a joint venture with Fiat to make 175,000 cars a year from 2009. It will make and distribute cars under the Fiat and Chery brands and introduce Fiat's Alfa Romeo premium sports car brand to China.

Another agreement has Chery supplying more than 100,000 engines to Fiat every year.