Ford Says It Got Clearance To Split China Venture With Mazda

Bloomberg News, August 27, 2012

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Ford Motor Co. (F) said it received approval from China’s top economic planner to split its venture in China with Mazda Motor Corp. (7261), paving the way for the U.S. automaker to increase control of its expansion in the country.

The National Development and Reform Commission approved an application for Ford to have a separate venture with Changan Automobile Co. instead of the current three-way ownership structure with Mazda, Ford Chief Executive Officer Alan Mulally told reporters in Chongqing, China today. The plan still needs to be approved by two ministries, Ford said in a statement.

The separation would restore Ford’s ability to have an equal say as its Chinese partner for the first time since 2006, when the U.S. company transferred a 15 percent stake to then- affiliate Mazda. The Dearborn, Michigan-based automaker has sought to break up the China venture after selling down its stake in Mazda in 2008 to raise cash.

“For Ford, they won’t have to think of Mazda and will have more freedom in making decision for future development in China,” said Lin Huaibin, a Shanghai-based analyst with industry researcher IHS Global Insight. “They will be able to make full use of Chongqing as a strategic production base in western China and they can focus on developing their own products suitable for the Chinese market.”

Increasing its stake in the China venture to 50 percent would allow Ford to book more revenue from car sales and parts, according to Bill Russo, a Beijing-based senior adviser at Booz & Co.

China Expansion

Mulally was in Chongqing to attend the groundbreaking ceremony for Ford’s third passenger-vehicle assembly plant in the city, which would add annual capacity of 250,000 vehicles a year when completed.

The reorganization is still subject to approval from the Ministry of Commerce, State Administration of Industry and Commerce and the Ministry of Industry and Information Technology, according to Ford.

Ford this year has disclosed moves to add production output in China, including plans to build a $760 million assembly plant in Hangzhou. The company today signed a letter of intent to expand research and development in the country.

“We’re very pleased with the restructuring and the way its going,” Mulally said today. “We have approval from the NDRC and we’re proceeding through the regulatory process, so we’re very appreciative and encouraged.”

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Ma Jie in Tokyo at jma124@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net