Mitsubishi Motors set to buy 20 pct stake in China

[Variance]

Mitsubishi Motors set to buy 20 pct stake in China carmaker

Fri Feb 17, 5:01 AM ET

TOKYO (AFP) - Japan's Mitsubishi Motors has reached an outline agreement to buy a stake of at least 20 percent in Chinese carmaker South East Motor (Fujian) from Taiwan's China Motor.

Mitsubishi Motors, Japan's fourth-largest automaker and the only one now in the red, wants to expand its presence in mainland China.

"We have agreed with China Motor that we will buy about 20-25 percent of the shares of South East Motor," said a spokesman for Mitsubishi Motors on Friday.

"By the purchase of the stake we aim to strengthen our operation in China although the details of the agreement are still under negotiation," he said.

An official at China Motor in Taipei confirmed an agreement had been reached in principle for it to sell a 20 percent stake in South East Motor (SouEast) to the Japanese automaker.

The SouEast venture, established in 1995 with registered capital of 138 million dollars, was set up as a 50-50 joint venture between China Motor Corp and China's Fujian Motor Industry Corp.

Fujian Industrial Motor Group's stake in SouEast will remain unchanged while China Motor will retain 30 percent after the sale to Mitsubishi.

Mitsubishi Motors has previously said it planned to participate in the management of SouEast and make it a production and sales center of Mitsubishi cars in China.

The deal will be Mitsubishi's second investment in a Chinese automaker. It already has a 16 percent stake in Changfeng Motor.

The mainland China newspaper China Business News cited a top executive from China Motor as saying the deal would be wrapped up next month, ending negotiations that began more than two years ago.

SouEast, a relatively minor player in China's booming auto market, has struggled as bigger rivals such as Honda and Toyota have battled for supremacy in the world's fastest growing market.

SouEast sales in 2004 slumped to 60,069 units from 83,533 units a year earlier, according to the company's website.

In May, SouEast's sales outlets will be integrated into the Mitsubishi network while new SouEast cars will also carry the Mitsubishi brand, the website says.

Newly produced SouEast models will have Mitsubishi technology as well access to the company's after-sale services.

Link: http://news.yahoo.com/s/afp/20060217/bs_af...wN5bnN1YmNhdA--