BRIEF: Merger rumors swirl around automakers Dongfeng, Changan

Concurrent restructuring plans announced by car-making listed units of Dongfeng Motor Corp. and China South Industries Group have led to speculation that the two large state-owned automakers may be preparing to merge.

In separate stock exchange filings on Monday, Dongfeng Motor Group Co. Ltd. (0489.HK) and Chongqing Changan Automobile Co. Ltd. (000625.SZ), a unit of China South Industries Group, said their state-run parents were planning to reorganize with other state-run entities. Major state-run companies from the same industry often make such announcements in tandem when they are executing actions orchestrated by their government owners.

Dongfeng’s Hong Kong-listed shares surged 26% on Tuesday, while Changan’s rose by a smaller 4.7%. China’s car industry is in need of consolidation due to its large excess capacity from about a half dozen major producers and many smaller ones around the country. But consolidation has failed to happen due to reluctance by government stakeholders to give up control of such important contributors to their local economies.

By Doug Young

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