Dongfeng, Nissan Sign Joint Venture Agreement

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Last updated at: (Beijing Time) Friday, September 20, 2002

Dongfeng, Nissan Sign Joint Venture Agreement

Dongfeng Motor Corporation in central China and Japan's Nissan Motor Co. Ltd. signed a cooperation agreement Thursday in Beijing.

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China's second largest auto maker, Dongfeng Motor Corporation, and Japan's Nissan Motor Company will merge all commercial and passenger vehicle operations in China according a joint venture agreement signed Thursday.

Vice-Premier Wu Bangguo met with Nissan president and CEO Carlos Ghosn before the signing ceremony and offered congratulations on the establishment of the long-term and comprehensive partnership.

The new company, Dongfeng Motor Co., Ltd. (Dongfeng Motor), will be the first Sino-foreign joint venture to manufacture a full line of trucks, light commercial vehicles and passenger cars in China.

Dongfeng Motor will incorporate Dongfeng's buses, trucks and commercial vehicles in addition to a full range of Nissan passenger vehicles. Nissan and Dongfeng aim to create a globally competitive commercial vehicle and passenger car manufacturer with a target of 550,000 unit sales by 2006.

"Nissan will directly invest 1.03 billion US dollars in the new company in order to acquire a 50 percent equity stake, and will dedicate between 20 billion to 30 billion Japanese yen in capital expenditure for specific Chinese product development," said Ghosn.

As a state-owned factory established in 1969, Dongfeng will hold another half of the stake in the form of asset investment.

Miao Wei, chief executive officer of Dongfeng, said that Dongfeng would invest all of its intangible and fixed assets except for its former joint ventures.

Under the agreement, Dongfeng Motor will introduce six of Nissan's passenger car models by 2006 besides the popular Bluebirdmodel that has been locally produced in China.

In 2003, the production of Sunny sedans will begin.

The agreement also states that the partnership will create a new passenger vehicle research and development center in addition to reinforcing Dongfeng's existing research and development resources in commercial vehicles.

Miao said that the managerial team of the new joint venture would be organized around March next year. Dongfeng and Nissan had agreed that in the first eight years of operation, the chief executive officer would be nominated by Nissan, and the board chairman by Dongfeng.

During the period, Dongfeng will send executives to Nissan's subsidiary firms around the world to study management techniques.

Nissan is Japan's second largest auto maker. It has launched an ambitious plan to increase sales by one million units from the 2002-2004 fiscal years.

Ghosn said by teaming up with Dongfeng in China, Nissan could add 80,000 unit sales in the target term, while upgrading profit margins.

This year marks the 30th anniversary of Nissan's presence in China. In 1972, the first Nissan-produced Cedric model entered the Chinese market.

However, Nissan only began to see substantial progress of its operations in China after a joint-venture deal with Dongfeng in Guangzhou in 2000 to produce sedans based on Nissan Bluebird. It has turned out to be better than expected and led to a broadening of bilateral cooperation with other commercial vehicles.

Ghosn said that the Chinese government has a clear strategy about the development of the automotive industry, which is meant to bolster three leading auto makers in the country, and Dongfeng is one of the three flagship conglomerates.

The partnership complied with the momentum, said Ghosn. Nissan could make use of Dongfeng's existing production and sales network to "open the door of the China market."

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