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Yesterday, the People's Government of Fujian Province and Dongfeng Motor Corporation signed a strategic cooperation framework agreement. Dongfeng will transfer part of the equity of Fujian Provincial Automobile Industry Group Co., Ltd. by means of capital increase, and at the same time form an investment company holding Southeast Automotive. Although the Dongfeng restructuring of Fuqi’s equity adjustment plan remains secret, this cross-regional merger and reorganization is still seen as the third largest reorganization case in the domestic auto industry following SAIC’s merger with NAC and Chang’an to restructure the CAAC.
According to the agreement, Dongfeng Motor will accumulate group resources to support the development of Fujian base autos in passenger vehicles, commercial vehicles, powertrains, and key auto parts, while the Fujian provincial government will create a good development for Fujian auto industry. The environment fully supports the development of Dongfeng Motor Company's business in Fujian and jointly accelerates and promotes the realization of the scale of production and sales of 1 million vehicles in Fujian Province.
Fuqi Group was established in 1992 and is a wholly state-owned company in Fujian Province. Its subsidiaries are Southeast Automotive, Fujian Daimler, Xiamen Golden Dragon, and New Longma Automobile. The auto companies of the group only made profits for Southeast Motors and Xiamen Golden Dragons, while Fujian Daimler and New Long Ma, which had not been established for a long time, were losing money. In fact, the development of Fuqi in recent years has been detached from the edge of the industry, lacking the support of economies of scale, and only occupying 0.5% of the domestic auto market. In 2011, Fuqi Group achieved sales revenue of 30 billion yuan, but by 2012, Fuqi Group achieved operating income of only 10.26 billion yuan.
Previously, Fuqi said that the reorganization will be divided into two steps: the first phase of Dongfeng’s acquisition of more than 40% shares of Fuqi; the second phase, when Fufeng’s acquisition of Dongfeng’s annual sales of 300,000 vehicles, Dongfeng’s acquisition of Fu 20% of the company's shares, becoming a controlling shareholder.
However, Fuqi's internal equity structure is complex. The entire vehicle business involves Mitsubishi Motors, Daimler, China Motors, and Longyan City Government. The reorganization negotiations and future business boost will also need to go through a long process. Take Southeast Auto as an example. FuChao, Mitsubishi and Taiwan Zhonghua respectively accounted for 50%, 25% and 25% of shares. After Dongfeng enters, the sorting of equity structure must first persuade Mitsubishi Motors to withdraw, which is difficult to imagine.
Jia Xinguang, an automotive expert, believes that the reorganization of Fufeng by Dongfeng may indicate a new wave of reorganization of the auto industry. At the beginning of this year, the Ministry of Industry and Information Technology and other 12 ministries and commissions jointly issued the "Guidance Opinions on Accelerating the Merger and Reorganization of Enterprises in Key Industries." It is required that by 2015, the industry concentration of the top 10 automobile manufacturers in the automotive industry reach 90%, and 3 to 5 companies have completed the establishment. The core competitiveness of large-scale automotive enterprise groups.