Dongfeng to get 14 pct stake in Peugeot

Dongfeng Motor Group Co Ltd, one of China's largest automakers, and the French government will each invest 800 million euros ($1.098 billion) for a 14 percent stake in French carmaker PSA Peugeot Citroen, Reuters reported Tuesday.

The share trading of Dongfeng was suspended Tuesday due to important news to be released soon, according to a filing on the website of Hong Kong Exchanges and Clearing.

Dongfeng gave no comment on the news.

But a staff member with the investors' relations department of Dong Feng, who asked to be anonymous, told the Global Times Tuesday that the company will release an announcement related to the deal on Wednesday.

Dongfeng and the French government will acquire the new stock of PSA for 7.5 euros per share, said the report.

"It is worthwhile to invest 800 million euros to join a leading global carmaker," Feng Shiming, an executive director of Shanghai-based Menutor Consulting, told the Global Times Tuesday.

According to the investment deal, a 25 percent stake and 38 percent of voting rights owned by the Peugeot family will be equally diluted to parity with Dongfeng and the French government, lower than the one-third demanded to veto decisions, the report said, suggesting the Peugeot family's 200-year control of the company will come to an end.

The investment cannot ensure that Dongfeng will get core technology from the PSA, Wu Shuocheng, editor-in-chief of auto website auto.gasgoo.com, told the Global Times Tuesday.

China's SAIC Group purchased 48.9 percent of South Korea's Ssangyong Motors in 2005, but the cooperation has failed after several strikes by Korean employees accusing SAIC of only caring about taking away the Korean company's technology, according to media reports.

"The technology transfer is always the most sensitive part in cooperation," said Feng.

However, Feng still believed the investment of Dongfeng is an important achievement in the history of China's auto manufacturing industry, next to Geely Holdings' acquisition of Volvo's car business in 2010.

It will be a crucial step of Dongfeng's globalization strategy, Feng said.

It is wise for Dongfeng to emphasize technology in overseas cooperation, such as its cooperation with Getrag Group, he noted.

Dongfeng set up a joint venture with Germany's Getrag Group in Central China's Hubei Province to produce advanced automatic transmissions in 2012.

The cooperation is valuable because the automatic transmission is the biggest technological barrier faced by Chinese automakers, Feng remarked.

Moreover, Dongfeng has had a joint venture with PSA since 1992 and established another joint venture with French carmaker Renault SA last year, so the investment in PSA will give Dongfeng more say in the joint venture of PSA and further strengthen its advantage in manufacturing and selling French-style cars in China, according to Feng.

PSA will greatly benefit from the investment.

Given PSA's weak performance in recent years, the investment from Dongfeng will be very helpful for the French carmaker, as the Chinese market has became increasingly important for the company with the European market in recession, said Wu.