China Aviation Industry Corp I (AVIC I), the nation's leading aviation manufacturer, is expanding in its industrial chain by acquiring a machine tool manufacturer.

 

Guizhou Aviation Industry Corp (GAIC), a subsidiary of AVIC I, will acquire 100 percent of the shares of Dongfang Machine Tool Co Ltd in Southwest China's Guizhou Province.

 

GAIC signed an acquisition and restructuring agreement with the local city government of Duyun, where Dongfang is located, on July 1, Wu Jiwei, GAIC's public relations director, told China Daily on Tursday.

 

Dongfang, founded in 1965, was before one of China's six-largest heavy machine tool manufacturers. The State-owned enterprise went bankrupt in 2005.

 

GAIC will invest no less than 100 million yuan in upgrading Dongfang's technology. It plans to reach an annual output value of 1 billion yuan in five years, according to AVIC I's website.

 

The move is expected to support AVIC I's core business in aviation manufacturing, Wu said.

 

"Dongfang has a glamorous history and the basic foundation is still good," Wu said.

 

"We hope to create an industry leader in machine tool manufacturing. It will also support our main business in aircraft component manufacturing," Wu said.

 

Wu declined to reveal the total value of acquisition, saying only that GAIC will not be responsible for Dongfang's debts.

 

"It is hard to say whether the acquisition will be a strong support to AVIC I in the future," said Li Lei, an aviation analyst with CITICS China Securities.

 

"It depends on whether GAIC has the capabilities to revitalize the bankrupt company and how Dongfang can complement GAIC's current businesses," Li said.

 

The acquisition is not AVIC I's first efforts for expansion.

 

AVIC I is reportedly in talks to acquire Harbin Bearing Group Co, one of China's largest bearing producers.

 

GAIC mainly produces aircraft and automobile components. It is also producing a fighter jet trainer.

 

(China Daily July 13, 2007)