April 27, 2024

Changhe Independent was granted the "Four Big Four" Reorganization Pattern Gradual


For the first time in the history of China's auto industry, the case of reorganizing the assets of central enterprises by local companies is about to take place.

Although the website of the SASAC has not made any publicity on Changhe’s independence, according to informed sources, not long ago, the SASAC has issued instructions on Changhe Automobile’s disengagement from the Chang’an Group, and agreed that Changhe Automobile is independent.

According to internal sources in Changhe, the reorganization of Changhe by BAIC has basically settled. The reason for not making public announcements is that “we don’t want to be extravagant and bring resistance to the reorganization of Changhe by BAIC”.

BAIC Group is a state-owned large-scale enterprise group in Beijing. Changhe is a directly-owned enterprise under the SASAC. BAIC reorganizes Changhe to open the way for local companies in the auto industry to merge and reorganize the assets of central enterprises.

Independent approval

The first positive response to Changhe’s independence was the management of the Chang’an Group. He acknowledged that Changhe’s independence has been approved by the SASAC.

Changhe Automobile’s middle management personnel also admitted in private that Changhe Automobile’s independence has been approved, and Beijing Automotive Group will take over Changhe Automobile.

Changhe Automotive was originally affiliated with Changhe Aircraft, a subsidiary company of China National Aviation Industry Corporation. It operated micro-vehicles and established a joint venture with Japanese automaker Suzuki Motors to establish Changhe Suzuki. In November 2009, under the promotion of China Ordnance Equipment Group Corporation and China Aviation Industry Corporation, Changhe Auto, Hafei Automobile, Dongan Power, Changhe Suzuki and Dongan Mitsubishi were included in the Changan Automobile Group to jointly establish Changan Automobile Group. The Armed Forces Group holds 77% of the shares and AVIC holds 23%. Since then, Changhe Automobile has been included in the Chang'an system built by Chairman Xu Liuping of Chang'an Group.

“The fuse that led to the breakdown of the cooperation between the two sides is production qualification. Chang’an intends to transfer Changhe’s passenger car production qualification to Chang’an Mazda, which is unacceptable to Changhe,” Zhang Zhiyong, a renowned car commentator, told reporters.

According to the above-mentioned sources, Changhe Automobile employees went on strike to protest against the Chang’an Group. After the resumption of work, Changhe Automobile refused to accept the instructions of the Chang'an Group and adopted a non-cooperative attitude. The Chang'an Group could not do anything about this.

Changan Merger Changhe is essentially a restructuring plan between central and central enterprises. The central enterprises and the alliances of central enterprises are the development structures that the government explicitly supports. At that time, the competent authorities were quite partial to the central SOEs. In 2010, under the impetus of the competent authorities, the Central Electric Vehicle Industry Alliance and the Electric Vehicle Club were established. The short-listed companies can share information. Although local companies including SAIC have submitted applications to the competent authorities, they have not been approved and the 16 companies that have been listed are all state-owned enterprises.

This preference is also reflected in the policy. In 2009, the General Office of the State Council issued the “Regulations for the Adjustment and Revitalization of the Automobile Industry” (hereinafter referred to as the “Planning”), and the second paragraph of the third chapter of the “Planning” clearly states that “the encouragement of FAW, Dongfeng, Large auto companies such as SAIC and Changan have implemented mergers and reorganizations nationwide and supported auto mergers and acquisitions by BAIC, Guangzhou Automobile, Chery and CNHTC.

Since then, the media has also referred to the “car four large and small” abbreviation for the large automobile enterprise groups. The “four big” are the FAW, Dongfeng, SAIC, and Chang’an that can be merged and reorganized across the country. The four companies mentioned above except SAIC Are directly under the central enterprises. The issuance of this policy means that all local enterprise groups other than SAIC have not reorganized their central SOEs.

Local enterprises restructuring state-owned enterprises

In the three years after the “planning” was released, the purpose of “Planning” to increase the concentration of the automotive industry has not been reached. In addition to Changan's integration of Hafei and Changhe, the well-known restructuring cases in China include Guangzhou Automobile's integration of Changfeng and Beijing Auto's acquisition of Baolong and Zhenjiang Auto, and there are no major mergers and acquisitions. Due to government protection, the concentration of China's auto industry industry is still low, production efficiency is not high, and waste of resources has not been significantly improved.

Some officials from the Ministry of Industry and Information Technology and the National Development and Reform Commission believe that the "Four Small and Four Small" mergers and reorganizations encouraged by the "planning" have not produced the expected results, and the policy trend will change.

In 2012, the State Council issued the "Industrial Transformation and Upgrade Plan (2011-2015)" (hereinafter referred to as "upgrade plan"). "Upgrade Planning" is actually a rectification of the "planning." “Upgrade Planning” clearly stated that by 2015, the industry concentration of the top 10 Chinese auto companies will increase from 82.2% in 2010 to over 90% in 2015, and 3 to 5 companies with core competitiveness will be formed. Large-scale automobile enterprise group.

"China will implement and improve various policies and measures, improve management and service, establish a sound coordination mechanism, adhere to market-oriented operations, fully respect the will of enterprises, and guide and motivate enterprises to voluntarily participate in mergers and acquisitions independently." Minister of Industry and Information Su Bo revealed the above information. Another person in charge of the Ministry of Industry and Information Technology gave a further explanation: "The four major and four small development patterns and reorganization models will no longer be protected by policies."

"Upgrade Planning" breaks the policy barriers of mergers and acquisitions and encourages purely market-oriented mergers and reorganizations. This cleared up the final policy barriers for the restructuring of central enterprises by local enterprises.

After the "Upgrade Plan" was released, Beijing Auto's reorganization of Changhe will become the first case of local enterprises reorganizing central enterprises. According to informed sources, BAIC will complete the reorganization of Changhe’s shares and assets during the year.

“Beiqi has opened this precedent and is a significant landmark event in the history of China’s auto industry.” Su Hui, chairman of the branch of the China Automobile Dealers Association’s tangible autos, said: “This will provide precedents and successful experiences for the future restructuring of local enterprises by local enterprises. It is of positive significance for the Chinese auto industry to increase industrial concentration and enhance the competitiveness of independent brands."



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