Changhe Auto Seeks to Quit Changan

The governor of Jiangxi Province Lu Xinshe recently called for a "restructuring" of the local vehicle maker Changhe, giving an official boost to its effort to break away from the Chongqing-based Changan Auto. According to Securities Daily, on behalf of Changhe provincial officials are negotiating with Changan and its owner, the central government, on the terms of a divorce.

Previously an arm of the Aviation Industry Corporation of China (AVIC), Changhe Auto became part of Changan in November 2009, together with Hafei, Dongan Auto Engine, and their Sino-foreign joint ventures–Changhe-Suzuki and Dongan-Mitsubishi. The mergers, arranged by the central government (in particular, the State-owned Assets Supervision and Administration Commission, or SASAC), made Changan the fourth largest auto conglomerate in China, after FAW, Dongfeng, and SAIC.

For many at Changhe, it was a forced marriage. They feel being sold out and ignored. In early 2012, learning that Changan planned to transfer the production permit of Changhe-Suzuki to Changan-Mazda (which needed it to split from Changan-Ford), they went on strike and forced managers sent from Chongqing to leave.

"We currently get neither technology nor money from Changan, and have not launched a new Changhe model since the merger. We must leave it and look for better partners," says a Changhe official.

In Jingdezhen, a place known as the "Porcelain Capital" and home to Changhe, the local government is also discontent. In May 2010, Changan’s Chairman Xu Liuping signed an agreement with the city, promising to build a new production base there which would roll out 500,000 vehicles and 300,000 engines a year. Changan, however, later reneged on the deal.

After quitting Changan, Changhe would be owned by the provincial government of Jiangxi. According to a source close to the matter, the planned revival strategy would include three main parts: look for a partner that is also based in Jiangxi; strengthen cooperation with Suzuki; seek investors to solve the money problem for developing new models. For the first task, JMC (Jiangling Motor) is said to be the ideal choice, while Jiangxi Copper may be a main financier of the independent Changhe.