First Automotive Works Corp (FAW), China's No.2 auto group in 2006 sales, yesterday denied a report that it would buy Chrysler Group, the struggling US arm of DaimlerChrysler.

 

The Shanghai-based Oriental Morning Post yesterday reported that state-owned FAW has shown an interest in acquiring Chrysler as a quick way to have independent international brands, quoting people familiar with the matter. Representatives had been sent to the US for negotiation, the report said.

 

Earlier this month, DaimlerChrysler agreed to sell either part or all of its stake in Chrysler and announced plans to cut 13,000 jobs in three years and reduce its output of Chrysler, Dodge, and Jeep cars by 10 to 20 percent to rejuvenate its overall profits.

 

Ever since DaimlerChrysler was created in November 1998 through the US$40 billion merger of Daimler-Benz AG and Chrysler Corporation, Chrysler has become a burden for the group.

 

Last year, Chrysler posted a loss of US$1.4 billion, offsetting the US$3.1 billion operating profits posted by Mercedes-Benz and the strong performance by the truck group. The company is expected to continue its losses this year and a reshuffle could cost as much as US$1.3 billion.

 

Gao Yuan, director of FAW's news center, said it had no plans to buy Chrysler.

 

"We don't have the huge amount of money needed to buy Chrysler," Gao told China Daily.

 

Li Liping, an official from the public relations department of DaimlerChrysler (China) Ltd, refused to comment on the matter.

 

Currently FAW Group owns three independent sedan companies, FAW Car Co Ltd, Tianjin FAW Xiali Automobile Co Ltd, and FAW Haima Automobile Co Ltd. However, it is difficult for these companies to help FAW to become global.

 

The company, based in the northeastern city of Changchun, posted 3.5 billion yuan (US$452.2 million) in 2006 pre-tax profit on its core-business turnover of 148.7 billion yuan (US$19.2 billion).

 

Reportedly, early in the 1980s FAW contacted Chrysler about possible cooperation when the Chinese automaker started to make sedans, but could not accept the high terms Chrysler asked in the negotiation.

 

A Beijing plant owned jointly by DaimlerChrysler and a local partner is assembling Chrysler's sport utility vehicles and sedans.

 

General Motors is reportedly negotiating with DaimlerChrysler to buy Chrysler. A slew of hedge funds and investment groups have also shown interest in Chrysler.

 

Overseas takeover by domestic automakers

 

On October 28, 2004, Shanghai Auto Industry Group spent US$500 million acquiring a controlling 48.92 percent stake in South Korean carmaker Ssangyong Motors. This was the largest overseas takeover by a domestic automaker at that time.

 

On July 23, 2005, Nanjing Automobile bought MG Rover, the failed Birmingham carmaker, for more than £50 million (US$97.7 million).

 

(China.org.cn, China Daily February 28, 2007)