Central enterprise reform speeds up the restructuring of Changan, FAW and Dongfeng Automobile Group

Recently, Chongqing Changan Automobile Co., Ltd. (hereinafter referred to as "Changan Automobile", 000625.SZ) has finally settled its equity transfer. According to the relevant announcement, China Changan Automobile Group Co., Ltd. (hereinafter referred to as “China Changan”), the controlling shareholder of the company, transferred the 21.56% stake in Changan Automobile to China Ordnance Equipment Group Co., Ltd. (hereinafter referred to as “Bingzhuang Group”). The transfer registration process has been completed.

During the two sessions this year, the above-mentioned equity transfer was publicly disclosed for the first time, which triggered the opening of the “brain hole” of investors. Is it preparation for mixed reform and merger of central enterprises, or simply streamlining the management structure of state-owned enterprises? The equity changes also caused various speculations. Under the layers of fog.

Hu Chi, a researcher at the Research Institute of the State-owned Assets Supervision and Administration Commission of the State Council, said in an interview with the reporter of China Business News that the automobile industry is a by-product of the reform of the military-to-insurance group. The next step is likely to be divested and merged with other state-owned car companies. This is in line with the reform intention of the high-level concentrated resources to become stronger and bigger.

The reporter noted that in addition to Changan Automobile, several other auto companies including FAW and Dongfeng are also accelerating the opening of the reform through asset adjustment. In the tide of reforms in this technical iteration, how to proceed to the end? The breakthrough seems to be an important weight.

The reform of the “door-to-door”

According to the shareholding structure chart, before the free transfer of the shares, China Changan and its wholly-owned subsidiary Zhonghui Futong (Hong Kong) Investment Co., Ltd. held 40.88% and 2.23% of Changan Automobile Co., respectively. After the transfer was completed, the Ordnance Equipment Group held a 21.56% stake in Changan Automobile and became the direct controlling shareholder of Changan Automobile. At the same time, China Changan and its subsidiaries retained a 21.56% stake in Changan Automobile and remained a shareholder of Changan Automobile. After the implementation of the free transfer of the shares, the actual controller has not changed, and is still the weapon equipment group.

Bingzhuang Group is a wholly-owned holding company of the State-owned Assets Supervision and Administration Commission. Its industry covers auto, motorcycle, special equipment and equipment manufacturing. China Changan is a wholly-owned subsidiary of Bingzhuang Group, which carries the industrial chain of vehicle and parts production, sales and research. It is currently one of the four major automobile groups in China.

In January 2018, the Bingzhuang Group was changed from a state-owned enterprise to a wholly state-owned company to complete the restructuring, laying the groundwork for promoting the reform of state-owned enterprises. As early as 2016, the Bingzhuang Group formulated a preliminary pilot program for the reform of mixed ownership of military enterprises, and identified four pilot units. As an important civilian product segment of the Bingzhuang Group, Changan Automobile has become the “leader” of the group reform.

When the news of the transfer of Changan Automobile's equity was just released, there were many speculations in the industry, but the move was to pave the way for mixed reform, or to prepare for the merger and reorganization of central enterprises. There is still no conclusion.

According to the opinions of many interviewees such as Zhong Shi, senior analyst of the automobile industry, Changan Automobile's share reform action is very likely to be related to the restructuring of central enterprises. Zhong Shi believes that the mixed reform does not necessarily need to be motivated within the group. The transfer of equity is more likely to prepare for the restructuring and merger of another line of central enterprises. Next, Changan Automobile may propose a major move to merge with other auto companies.

The recent high frequency news is that Changan Automobile, FAW and Dongfeng intend to merge to form China's huge automobile group. The news originated from 2015 to the present, FAW, Dongfeng, Changan, in addition to high-level frequent adjustments and exchanges, and gradually strengthen the cooperative relationship.

In December 2017, Changan Automobile, FAW and Dongfeng jointly signed a strategic cooperation framework agreement. The three parties will cooperate in four areas of forward-looking common technology, automobile full-value chain operation, expansion of overseas markets and exploration of new business models. On July 5, 2018, Changan Group announced that FAW, Changan and Dongfeng will join forces to enter the shared travel industry. The tripartite strategic cooperation agreement began to gradually land.

However, the calm attitude of all parties has made the direction of this merger and reorganization path unclear. "It’s too early to talk about merging everything." However, Zhong Shi believes that it is clear that equity changes are good for Changan Automobile. FAW and Dongfeng are directly under the State-owned Assets Supervision and Administration Commission. If they really want to merge, Changan Automobile and its The qualifications are not equal. With this equity transfer, the administrative management level will be upgraded and the right to speak in the negotiations will be improved.

From the management level, Bingzhuang Group and FAW and Dongfeng are flat units, which belong to the SASAC. Changan Automobile is a third-level company under the SASAC. After the equity adjustment, Changan Automobile ranks up to the rank of the Bing Group. Subsidiary, the second-level company under the State-owned Assets Supervision and Administration Commission, the company's status and administrative management level are further enhanced.

For the transfer of equity, China Changan official said that it is to strengthen the automobile business and further promote the development of Changan Automobile.

It is understood that Changan Automobile has CS75, Ruiyi, Yidong, Uno, Yuexiang, Benben and other independent brands, and has established joint venture brands with Ford, Suzuki, Mazda and Peugeot Citroen. In the past years, benefiting from investment and products, Changan Automobile's operating income and net profit have achieved rapid development, leading many independent auto companies. Until last year, the performance suffered a major decline. The financial report shows that Changan Automobile's revenue in 2017 was 800.12 billion yuan, up 1.87% year-on-year; the net profit attributable to shareholders of listed companies was about 7.137 billion yuan, down 30.61% year-on-year; the market share was down one percentage point to 9.95%. In the first quarter of 2018, the trend of the major decline continued, with a net profit of 1.392 billion yuan, a year-on-year decrease of 42.04%.

Trend emerging alliance

On July 4, the “Regulations on Investment Management of Automobile Industry (Draft for Comment)” promulgated by the National Development and Reform Commission clarified that enterprises should encourage mergers and acquisitions and strategic cooperation through joint ventures, jointly research and develop products, jointly organize production and enhance industrial concentration. degree. Support state-owned auto companies and other types of enterprises to carry out mixed ownership reform, strengthen alliances, and form a world-class auto enterprise group. Encourage key enterprises in the automotive industry to integrate advantageous resources in the fields of production, learning, research, and use, and form industrial alliances and industrial complexes.

As early as August 2016, the "Guiding Opinions on Promoting the Structural Adjustment and Restructuring of Central Enterprises" issued by the State Council formally proposed to encourage relevant central enterprises in the fields of communications, electricity, automobiles, new materials, and new energy to jointly establish joint-stock programs. The platform will increase the joint development of new technologies, new products and new markets, reduce disorderly competition and improve resource allocation efficiency.

Hu Chi said that under the favorable policies and the gradual liberalization of foreign stocks and the intensification of market competition, the re-integration of the national team is being forced to speed up, and the trend of the reform of internal enterprises through internal asset adjustment is becoming more and more obvious. .

The reporter learned from the announcements issued by some auto companies recently that a number of state-owned auto companies, including Dongfeng and FAW, have adjusted their assets to varying degrees and concentrated their advantageous resources. On June 30, Dongfeng Motor announced that its holding subsidiary Dongfeng Xiangyang Wagon Co., Ltd. acquired some of the inventory, equipment and intangible assets related to the passenger car business of Dongfeng Commercial Vehicle Co., Ltd. with an estimated value of RMB 26,668,300. According to the relevant announcement on June 5, China FAW intends to hold 24.41% of the shares of subsidiary auto parts company Fuao Auto Parts Co., Ltd. and 23.51% of shares of Changchun Yidong Clutch Co., Ltd. to the wholly-owned subsidiary free of charge. Company FAW Equity Investment (Tianjin) Co., Ltd.

"National car companies will not die if they reform..." On May 11, Changhua Automobile President Zhu Huarong's "positive anxiety" could not run. Zhu Huarong said, "If you don't build a world-class, there will be no retreat or even alive, especially for large groups. It is not realistic to rely on joint ventures to maintain development in the future."

At present, China's auto industry faces uncertainties in policy changes, the harshness of industrial competition, the complexity of technological iterations, the diversity of consumption conversion, and unpredictability. Zhu Huarong believes that these are all new problems facing the car companies in the new era.

In Hu Chi’s view, under the background of the reform of central enterprises, “the complexity of technological iteration” is also the breakthrough point of reform. Hu Chi said that the reform of central enterprises has gone through the exploration stage. At present, the relevant policy level is removing obstacles. The operational reform model has been put into practice, and the automobile and enterprises have combined their actual conditions with the new energy and intelligent networking of the industry. The trend will find a breakthrough, and the merger and reorganization of central enterprises will also accelerate in the automotive industry.