Ford and Mazda Seek to Terminate 3-Way China Joint Venture

Ford Motor Company, Mazda Motor Corporation and Chongqing Changan Automobile Company [wiki] are reportedly seeking approval from the Chinese government to terminate their three-way tie up.

Two sources with direct knowledge of the matter told Reuters that Ford and Mazda plan to pursue their own separate partnerships with Changan. The new two-way tie ups will reportedly give Ford and Mazda 50% ownership stakes in their respective joint ventures. One of the unidentified sources said, “They have submitted a joint proposal to the Chinese government to split up the partnership. Ford’s new JV with Changan will be based in Chongqing, while Mazda’s venture will be based in Nanjing.” It is unclear when the Chinese government will make its decision. A spokeswoman for Mazda China said the company is awaiting that decision. Ford and Changan both declined comment concerning the report. Ford’s relationship with Mazda has weakened since it reduced its majority stake to 13% in 2008. At that time, Ford was cash-strapped and saw the divestiture move as an expedient means of freeing up badly needed capital. Ford currently holds about an 11% stake in Mazda.

In September 2009, Ford and Changan broke ground for a $490 million plant in China. Ford is a 35% stake holder in this, its third China plant. Changan holds a 50% stake in the joint venture with Mazda as the minority share holder with only a 15% stake in the tie up.

Huatai Securities analyst Chen Liang says Mazda stands to benefit the most from a termination of the joint venture. “It’s a good move as a three-way tie could get complicated sometimes. The biggest beneficiary, however, would be Mazda as it could be an equal partner in the new tie,” he said. China has been a safe haven for foreign automakers during the global economic downturn. During the first four months of this year, car sales rose 63.6% in the country.

In March 2003, Mazda began manufacturing its Mazda6 mid-size sedan in China through its partnership with China’s No. 2 automaker, FAW Group. In 2006, Mazda entered into the three-way tie up with Ford and Changan to build the Mazda2, Mazda3, Ford Focus, Fiesta, Mondeo and S-MAX as well as the Volvo S40 and S80. The proposed breakup of the alliance is reportedly unrelated to Ford’s pending sale of Volvo to China’s China’s Zhejiang Geely Holding Group Company. The deal is expected to be finalized in the second quarter with Geely acquiring the Swedish brand for $1.8 billion.

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