Chongqing Changan Automobile Co. Ltd., Ford's carmaking partner in China, has won Chinese regulatory approval to invest US$60 million in a new company to help it control a smaller domestic rival.

Changan Auto would invest 500 million yuan (US$60.42 million) in a 50-50 new venture with the parent of Shenzhen-listed Jiangling Motors, which would allow it to control Jiangling, the two companies said in separate statements Thursday.

Jiangling's State-run parent would inject its 41-percent share of the listed Jiangling unit into the venture of the same name, which would eventually be able to produce 150,000 passenger cars and 150,000 commercial vehicles, according to the statements published in the Securities Times.

Jiangling's second-largest shareholder is Ford, which owns nearly 30 percent of the company. Its statement Thursday said it would offer Ford an option to buy another 7 percent stake in Jiangling after three years.

"The move will help Changan Auto compete for third place among Chinese automakers," Jiangling said in the statement.

Changan, China's top maker of minivans, also assembles compact cars with Japan's Suzuki Corp. It is now the country's fourth-largest vehicle maker after Shanghai Automotive Industry Corp. (SAIC), First Auto Works and Dongfeng Motors.

Analysts have said the merger could give Changan Auto about 15 percent of the domestic vehicle market, up from the current 9 percent — covering everything from cars to buses and tractors.

The complex acquisition is also seen as a sign of consolidation in a fragmented industry with over 100 players that have been grappling with a protracted slowdown for over a year.

Changan Auto, together with its rival Shanghai Automotive Co. Ltd., owner of a fifth of General Motors' major Chinese car plant, said over the weekend their net profit for the first half of 2005 could plunge over 50 percent.

Its Shenzhen-listed shares dove 6 percent this week, hit by earnings warnings.

(Shenzhen Daily July 8, 2005)