DaimlerChrysler to buy stake in China truck firm http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyID=2006-11-30T053558Z_01_SHA215972_RTRIDST_0_BUSINESSPRO-FOTON-DAIMLER-DC.XML&from=business
Thu Nov 30, 2006
By Fang Yan
SHANGHAI (Reuters) - DaimlerChrysler (DCXGn.DE: Quote, Profile, Research), the world's top truck maker, is to pay 817 million yuan ($104 million) for a stake in Chinese truck manufacturer Foton, as it looks to expand in the world's fastest-growing major market.
The German-U.S. auto giant will take a 24 percent stake in Beiqi Foton Motor Co. (600166.SS: Quote, Profile, Research) by buying 297 million new A-shares in the company, becoming its second-biggest shareholder, the Chinese firm said on Thursday.
DaimlerChrysler is paying 2.75 yuan per share, a 24 percent discount to Foton's close on the Shanghai Stock Exchange on November 21, when the shares were suspended.
DaimlerChrysler, the world's No.5 car maker, already produces Mercedes-Benz luxury cars and other car models in a joint venture with Foton's parent, Beijing Automotive Industry Holding, and has two other ventures in China, making multi-purpose vehicles and high-end buses.
But its expansion in China has lagged that of some global rivals such as General Motors (GM.N: Quote, Profile, Research).
"DaimlerChrysler now has a foot in the door of the local truck market, which has been growing at roughly 10-12 percent annually," said Zhang Xin, senior analyst at Guotai Junan Securities.
DaimlerChrysler's spokesman in China, Trevor Hale, told Reuters: "We have been in discussions with Foton for quite some time about cooperating to offer medium- and heavy-duty trucks in China."
He declined to comment further on the company's strategy.
News of the deal, which needs approval by Foton's shareholders and the Chinese government, boosted Foton shares by more than 5 percent by late-morning on Thursday. The stock has risen nearly 140 percent so far this year.
Unlike the passenger car market, China's truck market is still dominated by domestic players.
Sales of commercial vehicles -- vans, buses and trucks -- hit 1.5 million units in the first half of 2006, on track to beat last year's total of 2.5 million.
That growth is expected to continue, driven by a booming economy, infrastructure projects and the need to shift goods around the country.
New truck sales in Europe, one of Daimler's major markets, slipped in October, and sales in the United States and Japan -- where DaimlerChrysler owns 85 percent of Mitsubishi Fuso -- are forecast to drop significantly next year.
DaimlerChrysler trucks boss Andreas Renschler said in September he expected the business to increase profitability and return on net assets this year, but forecast a downward trend in North America, Europe and Japan. Renschler said then that DaimlerChrysler wanted to strengthen its position in China and India through working with local partners to improve their products by adding technology.
Foton, which made a 45.9 million yuan net loss in the first half -- sales rose 17 percent to 9.79 billion yuan -- will also issue 129.11 million new shares to parent Beijing Auto.
($1=7.8313 Yuan)
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