Changhe stops carmaking, ends venture with Suzuki

Shanghai, July 22 (Gasgoo.com) Loss-making automaker Jiangxi Changhe Automobile Co has said it will transform itself into an aerospace company by acquiring two aerospace units worth up to 920 million yuan ($134 million) from China Aviation Industry Corp, reported China Business News yesterday. As a result, the joint venture Changhe Suzuki Auto Co comes to an end. 

Changhe Auto, controlled by AviChina Industry & Technology Co, will transfer all of its assets and liabilities and issue up to 90 million new shares to China Aviation in exchange for the two subsidiaries (in Shanghai and Lanzhou), whose combined value is estimated at 800 million to 920 million yuan. Analysts also said that the auto-making facilities of Changhe Auto would be partly transferred to its sister company Hafei Auto under China Aviation.

China Aviation Industry Corp is a state-controlled holding company by merging the country's two state-run aircraft makers, China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II). According to the restructuring plan, Changhe Auto will shift to the aerospace industry, perhaps making aircraft parts such as aircraft electromechanical components.

Changhe Auto has 41% stake in its joint venture with Suzuki Motor -- Changhe Suzuki Auto Company. Now that Changhe Auto will withdraw from the auto-making operation, it is not a bad thing for Suzuki to end their loss-making partnership. China's industry regulator will decide later who will take over Changhe Auto's shares in the venture and partner with Suzuki.

In its latest five-year plan, Changhe Suzuki vows to reverse its years of losses to profits in 2008, and to raise its vehicle sales from last year's 107,700 units to 400,000 units by 2010. The automaker would also build an independent network for its Changhe brand so as to sell Suzuki and Changhe vehicles through separate channels. But now these ambitions have to be aborted.

Changhe Suzuki has an annual capacity of 100,000 units. Its product portfolio includes the Ideal / Ideal II subcompact cars, the Friend (called the Fuga in Mexico) tiny mini-van, the Freedom mini-van / mini-truck, plus the Wagon R, Landy and Liana mini-vans. 

In a local car show earlier this month,  the Suzuki Wagon R, Landy and Liana mini-vans made by Changhe Suzuki were named "the most popular fuel-saving, personal and compact vehicle models" in Jiangxi province, where the venture is based.