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Dongfeng Motor slashes non-core businesses to focus on automobile

Yolanda From Gasgoo| December 08 , 2017

Dongfeng Motor  China, FAW, Dongfeng and Changan,Dongfeng Real Estate Co., Ltd

Shanghai (Gasgoo)-On early December, FAW, Dongfeng and Changan signed a strategic cooperation framework agreement, attracting people's eyes on the three car central enterprises once again. Compared to FAW and Changan, Dongfeng seems a bit low-profile this year.

However, it is learned that Dongfeng Motor intends to sell 80% stake of its 100%-owned Dongfeng Real Estate Co., Ltd. with the price of about RMB 872 million (around $132 million). Based on the fact that Dongfeng has transferred 85% stake of Dongfeng Industrial Co.,Ltd. to promote the internal reform on water/power/gas supply and property management, it seems that Donfeng is gradually stripping its minor business.

In this regard, an analyst told reporters that such a strategy help Dongfeng Motor to use more market-oriented approaches to activate the business in an easy manner. He also explained that focusing on the major business will definitely keep and increase the value of the state-owned assets.

Stake transfer with 872 million yuan 

Dongfeng Motor Corporation owns 100% stake of Dongfeng Real Estate Co., Ltd. In 2016, Dongfeng Real Estate gained revenue of RMB 337 million (around $51 million) and its net profit was RMB 41.4826 million (around $ 6.3million). Up to Oct. 30, 2017, its revenues reached RMB 109 million (around $ 16.5 million) and net profit, RMB 8.9064 million (around $ 1.3million). As for significant credit rights and liabilities, it is indicated that Dongfeng Real Estate borrowed a loan of RMB 170 million (around $ 25.7million) from Dongfeng Motor Company at an annual interest rate of 4.35%, and the loan term is expanded from May 17, 2017 to May 16, 2018. In addition, Dongfeng Real Estate has owed Dongfeng Motor an internal loan of RMB 129 million (around $19.5 million). According to the transfer information, there are 3 training buildings in Wuhan, Hubei province with 48 sets of small property rooms that have been allocated to employees. The entrusting party estimates that based on the local real estate market conditions, the relocation compensation is calculated about 72,728,400 yuan according to the amount of business deductions.

Concentration on main industry

With the deepening reform of the state-owned enterprises, Dongfeng Motor is gradually stripping its non-core businesses. As early June, 25 this year, Dongfeng Electric Vehicle Co., Ltd., the subsidiary of Dongfeng Motor, signed an asset transfer agreement with Dongfeng Real Estate to transfer its properties and land using rights located in Wuhan Economic and Technological Development Zone, Hubei Province at a price of RMB 204 million. On Sept. 20 this year, Dongfeng Motor approved the transfer of 85% equity of Dongfeng Industrial Co., Ltd., which is a collective-owned subsidiary enterprise of Dongfeng Motor. Meanwhile, at the end of November this year, Dongfeng and China Resources Group signed a framework agreement to formally split Dongfeng Property Management business. According to Zhu Yanfeng, chairman and party committee secretary of Dongfeng, they are carrying forward the separation and transfer of the large-scale factory-office reform and reform on water/power/gas supply and property management. Such a strategy not only eases the burden of state-owned enterprises and optimizes the allocation of social source but also helps them focus on major business.

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