The company has announced that Harbin Dongan Automotive Engine Manufacturing Co. Ltd (DAE), an affiliated company, has signed a cooperation agreement with Mitsubishi Motors related to an automatic transmission (AT) project. DAE will integrate proprietary Mitsubishi automotive technology into the construction of a world-class automatic transmission production line. Total investment for the project is estimated at RMB 2 bln.

The AT project will be divided into two phases. The first phase will have a designed annual production capacity of 150,000 automatic gearboxes and is scheduled to enter production by the end of 2009. The second phase is targeting completion by the end of 2015, upon which production capacity will double to 300,000 units per annum.

The company underscored that considerable risk surrounds the aforementioned project, in large part due to its lengthy 8-year construction schedule. Moreover, intensifying market competition and soaring oil prices may dampen vehicle sales.

DAE boasts registered capital of RMB 500 mln, of which the company has invested RMB 180 mln, equal to a 36% stake. Harbin Dongan Engine (Group) Co. Ltd has contributed RMB 95 mln, good for a 19% stake, while Mitsubishi Motors has put up RMB 76.5 mln, or 15.3%. In recent years, investment returns on DAE have been the main source of profit for the company.

Source: China Securities Journal

Date: 7 Jul 2008

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