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Dongfeng Motor denies FAW merger

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2015-05-06 11:01Global Times Editor: Qian Ruisha

Does not respond to rumor about switch of chairmen with other auto group

Dongfeng Motor Group Co has not studied a possible merger between its controlling shareholder Dongfeng Motor Corp (DMC) and China FAW Group Corp, the automaker announced Tuesday, in response to rumors though it did not mention a related rumor about its chairman.

After enquiring with State-owned DMC, Hong Kong-listed Dongfeng Motor Group said that as of Tuesday neither firm has received any information about a merger from any governmental authorities nor expressed any relevant intention to any authorities, according to the announcement.

There will be a switch of chairmen between the two companies soon, Beijing Business Today newspaper reported on Monday.

Xu Ping, chairman of Dongfeng Motor Group, will soon take charge of China FAW Group, the report said.

While Zhu Yanfeng, deputy Party chief of Northeast China's Jilin Province, who is also the former chairman of China FAW Group, will become the new chairman of DMC, according to the report.

After Dongfeng Motor Group published the announcement denying a merger on the Hong Kong stock exchange on Tuesday, its trading resumed at noon.

The company's share price closed at 12.7 yuan ($2.05) on Tuesday, recording a day-to-day decline of 2.76 percent.

Meanwhile, Dongfeng Automobile Co, DMC's listed arm on the Shanghai bourse, also saw its trading halted on Tuesday due to market rumors, according to the announcement published on the Shanghai bourse.

Two of China FAW Group's listed companies on the Shenzhen Stock Exchange, FAW Car Company and Tianjin FAW Xiali Automobile, also had their trading stopped on Tuesday because the media reports had revealed information that the companies had not previously disclosed, according to an announcement published on the Shenzhen bourse, though it did not specify the information.

A source close to the matter but who refused to be named told the Global Times on Tuesday that the switch of chairmen will happen soon.

Both DMC and China FAW Group declined to comment when contacted by the Global Times on Tuesday.

However, a source who used to work at China FAW Group and asked to remain anonymous said that many employees at China FAW Group have heard that Dongfeng chairman Xu Ping will soon take charge of China FAW Group in a few days.

He also noted that the switch may be part of an anti-graft campaign being conducted on China FAW Group by the authorities.

Former deputy general manager of China FAW Group An Dewu was arrested in January over allegations of bribery while the company's former chairman Xu Jianyi was also put under investigation in March.

Xu Ping signed the Tuesday announcement published on the Hong Kong bourse as the chairman of DMC.

Neither of the two automakers has published any information related to the rumored switch in chairmen on their respective websites.

However, even if the chairmen switch happens, DMC will not combine with China FAW Group, Jiang Xuewei, analyst from Beijing-based China Investment Consulting, told the Global Times Tuesday.

"The two companies have overlapping businesses and nearly the same market shares, so it would not be profitable if they merge," Jiang said, noting that as the two automakers were not spun off from the same State-owned corporation, they do not have historical ties.

Jiang said that the two automakers both cooperate with foreign carmakers, which would also make a merger less possible.

Dongfeng Motor Group's annual revenue in 2014 was 80.95 billion yuan, an increase of 117.3 percent compared to 2013, according to its financial results released in March.

However, China FAW Group's auto sales has declined in recent years, which makes the company less competitive in the market, Jiang noted.

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