Dongfeng Fuqi to sign strategic reorganization agreement Southeast Automotive will be integrated

Yesterday (May 14th), the reporter learned from Dongfeng Motor Company that the company and Fuqi Group will formally sign a strategic reorganization agreement in Fuzhou on May 16th. Specific cooperation details will be announced at that time. According to report, Dongfeng Motor Company will integrate the passenger car business of Fuqi Group, but it will not involve the commercial vehicle segment.

"We will officially announce the specific details on Thursday (16th)." The responsible person of Dongfeng Motor Company told reporters.

Yesterday, Dongfeng Motor (600006, SH) was suspended due to "Dongfeng Motor did not disclose the abnormal fluctuations in the trading of shares."

According to the reporter’s understanding, the scope of the reorganization between the two parties involved the passenger vehicle business under the Fuqi Group, including the South East Motor and the new Longmax mini vehicle project launched, both of which will be included in the cooperation between the two parties, Xiamen Jinlong Bus and Fujian Benz etc. Commercial vehicle companies will not be included in this restructuring.

Since May of last year, rumors about Dongfeng Motor Company's integration of Fuqi Group have been heard, but it has been difficult to land. In August last year, the new Longmax automobile under Fuzhou Automobile Group suddenly obtained a piece of paper from the National Development and Reform Commission, approving its production of mini-bus and engine projects across product categories. According to rumors, the approval of the production qualification comes from the help of Dongfeng, and it is also an important condition for the Fujian government to “permit” Dongfeng to restructure the blessing.

Since then, news about the reorganization of Fufeng by Dongfeng Motor Company has once again become more apparent. Some media reported that Dongfeng Motor Company and Fuqi Group have conducted specific negotiations on the restructuring methods, equity ratios, and organizational forms, and plans to sign contracts at the end of last year. However, this signing ceremony did not come as expected. In December last year, Dongfeng Motor also issued a clarification announcement, stating that “the company currently does not have any major reorganization including the contents of the above-mentioned rumor, and there is no information that should be disclosed but not disclosed”.

According to industry analysts, the complex equity relationship between the Fuzhou Group and the restructuring model of both parties is the main reason why the two companies have been unable to reach a cooperation. How to clarify the many equity relations and coordinate the interests of all parties will be the biggest challenge facing the restructuring.

Automobile industry analyst Zhong Shixiang stated that for Fuqi, the short board still lies in the passenger vehicle business. “The equity relationship within Fuqi is also complex and integration is difficult to achieve in one step”. He believes that Dongfeng Motor or the first to integrate the weaker passenger car business, and then slowly in-depth cooperation.

“Dongfeng commercial vehicle system is already quite large, and the Fuzhou Group's Xiamen Golden Dragon is also in the forefront of the passenger car industry, and is the vanguard asset of Fuqi Group, so there is no need to integrate this aspect.” Zhong Shi believes that for Fujian Mercedes-Benz is also an advantageous cooperative project of Fujian's grafted multinational company Daimler Group.

According to some people's opinions, no matter what kind of plan is adopted for reorganization, Dongfeng Motor Company is a strong complement to its "grand autonomy" strategy. Fujian Province, where Fuqi Group is located, will become another strategic base for the south after Dongfeng’s successor to Guangdong. With the help of this geographically significant production base in Fujian, Dongfeng Motor Corporation will promote cooperation with Taiwan’s “China Motor” and export. All will play an active role.

According to Dongfeng Motor’s mid-term business plan, by 2016, Dongfeng Motor’s own brands, including commercial vehicles and passenger vehicles, will reach 3 million units and exports will reach 300,000 units.