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FAW, Dongfeng and Changan said to merge

Nancy From Gasgoo| December 14 , 2017

China auto market news, Xu Liuping FAW Group, State-owned Assets Supervision and Administration Commission of the State Council, FAW, Dongfeng and Changan

Shanghai (Gasgoo)- On Dec. 12, Xu Liuping, Chairman and Party Committee Secretary of FAW Group, was absent from the meeting of Audi core dealership investors. According to the person briefed the matter, Xu Liuping was invited by State-owned Assets Supervision and Administration Commission of the State Council to talk about the issue on the strategic cooperation of FAW, Dongfeng and Changan. They are said to develop the interconnectivity first.

All parties responded to the public that the cooperation was irrelevant to the merger and reorganization. According to person close to State-owned Assets Supervision and Administration Commission of the State Council, merger and reorganization is a key step for the reform of state-owned enterprises. The three parties hold great  potential to merge into one, which will help promote the reform of the groups and vitalize their resources. It is said that some related issues are being pushed, while the specific time of merger still remains to be determined.

On Dec. 1, FAW Group, Dongfeng Motor Corporation and Changan Automobile signed a strategic cooperation framework agreement in Wuhan, Hubei province, saying that they will cooperate in such areas as advanced generic technology innovation, the whole value chain operation of the auto industry, the strategy of going global together and new business mode. The cooperation immediately stirred up large public attention and guess.

Though it is a trend to be merged, the cooperation of FAW, Changan and Dongfeng still faces difficulties in a short time. Cui Dongshu, Secretary General of China Passenger Car Association (CPCA) believed that the cooperation of FAW Group, Changan Automobile and Dongfeng Motor Corporation hasn't born any competitive advantage, and there is little effective and successful experience to learn from the market.  

Another analyst explained that if FAW, Dongfeng and Changan can shape a joint force in technological R&D and capital, self-owned brands will be powerful enough to cope with the increasingly intense market competition though they are faced with great pressure from policy, market and competitors. Considering the three parties have too much similar products, if the merger is true, the management will be the major task for three parties. 

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