For the past three years, Chinese auto companies have merged and reorganized for the first time in the region, and have finally taken over Dongfeng.
On May 16, the Fujian Provincial Government and Dongfeng Corporation signed a strategic cooperation agreement in Fuzhou. The framework agreement is divided into two components. First of all, Dongfeng Company will acquire 45% equity of Fuqi Group held by Fujian Provincial State-owned Assets Supervision and Administration Commission in a capital increase manner. Secondly, Dongfeng Motor and Fuzhou Automobile Group will establish an investment company to hold South East Automobile, in which Dongfeng Corporation holds two-thirds of the shares and Fuqi Group holds one-third of its shares.
Dongfeng company hopes to get more. According to the agreement, Dongfeng Company hopes to increase its holding of 60% of shares in Fuqi Group. However, Fujian Province has set a precondition that Dongfeng Motor can increase its stake in Fuqi Group to 60% when Southeast Motor's annual sales reach 300,000 units (including engines).
It is reported that the "marriage" between Fuqi Group and Dongfeng Company is the independent choice between the two parties under the leadership of the government. Previously, Beiqi Group and Guangzhou Automobile Group had thrown olive branches to Fuqi Group, but Fuqi Group finally chose Dongfeng Company. The reason is simple: Dongfeng Company has stronger strength and stronger output management capability, which will help Fuqi Group realize long-term and sustainable development.
At present, Fuqi Group is in a situation of being marginalized. Fuzhou Automobile Group, which was established in 1992, had an operating income of only 10.26 billion yuan in 2012. Fuzhou Automotive Group’s auto companies only made profits from Southeast Motors and Xiamen Golden Dragon. Fujian Daimler and New Longma were all losing money. For many years, Fuqi Group has been suffering from no development funds and no prospective automotive projects, and Dongfeng Company has both financial and resource advantages. Therefore, when the Dongfeng Company and Fuqi Group decided to marry, the Fujian Provincial Administration was extremely optimistic about this cooperation.
How can Dongfeng and Fuqi be able to "marry"? First of all, Dongfeng has not previously been deployed on the southeast coast. Through strategic cooperation with the Fujian Provincial People's Government, Dongfeng can quickly realize its strategic layout on the southeastern coast, further consolidating and enhancing its leading position and influence in the domestic automotive industry. You can also use the geographical advantages of Fujian to “go to the sea†to speed up the pace of “going outâ€. Secondly, Dongfeng Company can use this to synergize the resources of China Mobile and Yulon Motor to further promote the development of the Greater China Brand. In addition, Dongfeng’s most concerned auto business will be the biggest beneficiary of this merger. The self-owned brand vehicles under the Fuzhou Automobile Group will become the increment of Dongfeng Motor Group's own brands, which will help accelerate the Dongfeng “autonomy†strategy and achieve Dongfeng’s own brand D300 mid-term business plan goals.
Due to the complicated ownership relationship of many subsidiary companies of Fuqi Group, Dongfeng Company is not in a hurry to accomplish its mission. The early stage of the reorganization with Fuqi Group will be Southeast China Automobiles, and will gradually increase the integration of Fujian Daimler and Xiamen Golden Dragon in the later period. For Dongfeng, the cross-regional mergers and acquisitions do not lie in the emphasis on rapid expansion, but rather in steady growth.
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