China's Guangzhou Automobile Industry Group is close to a deal to restructure minivan maker Zhejiang Gonow Automobile Co, China Youth Daily reported yesterday, citing the chairman of the smaller rival.

Liao Xuezhong, chairman of Taizhou-based Gonow, said a framework agreement has been reached and "both parties are deep in love at the current moment," the Beijing-based newspaper reported.

Spokespersons for both auto makers were not available for immediate comment.

Established in 2003, Gonow is a privately owned vehicle maker specializing in pickups, sport utility vehicles and minivans. It recently opened a new plant in Hangzhou in Zhejiang Province.

Xu Caihua, an auto analyst at Guodu Securities Co Ltd, said there are high hopes that the consolidation would go ahead as it fits the overall strategy of Guangzhou Auto, the Chinese partner of Japan's Toyota Motor Corp and Honda Motor Corp.

Gonow's restructuring is expected to help Guangzhou Auto complete its product line-up with the addition of minivans, a rapidly growing segment.

"The small business scale of Gonow would make it easier for Guangzhou Auto to acquire and restructure," Xu told Shanghai Daily. "But still it needs time to see how the consolidation works out."

In May, the car maker paid 1.05 billion yuan (US$153.7 million) for 29 percent of SUV maker Hunan Changfeng Motor Co in central China. Under the deal, Guangzhou Auto will invest 10 billion yuan in Hunan Province, where Changfeng Motor is based, in the next five years to boost their joint annual output to 500,000 units.

Earlier this month, Guangzhou Auto also completed an agreement with Italy's Fiat SpA to set up a venture in China to make small cars and engines.

(Shanghai Daily July 31, 2009)