China Carmakers Merge Assets Amid Industry Buildup

JOE McDONALD

BEIJING (AP) — A state-owned Chinese automaker announced Tuesday it will take over several smaller producers amid a government effort to build up bigger domestic car companies that can compete globally.

Changan Automobile Group said it will take over the auto assets of Aviation Industry Corp. of China, which will in turn receive a 23 percent stake in Changan. They include two Chinese brands and joint ventures with Suzuki and Mitsubishi.

"That's pretty significant," said John Bonnell, an analyst for research firm J.D. Power and Associates. "It's a step toward what they're trying to get done."

Financial terms were not released, but state news agency Xinhua said the deal was one of the biggest in recent years in China's auto industry.

Beijing is attempting to orchestrate mergers among China's dozens of small automakers to create big, efficient producers. But progress has been slow and the effort faces opposition from leaders of city or provincial governments that own car makers and are reluctant to see local producers close.

A government plan released this year calls for building up two to three large Chinese automakers with annual production capacity of 2 million vehicles. It is part of official ambitions to create globally competitive Chinese companies in industries ranging from finance to telecommunications.