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Discussion Starter · #1 · (Edited)
21 March, 2002

MG ROVER AND CHINA BRILLIANCE CREATE GLOBAL AUTOMOTIVE ALLIANCE

MG Rover Group Limited (MG Rover) and China Brilliance Industrial Holdings (CBIH) have entered into a long-term strategic Alliance and co-operation agreement to finance, develop, manufacture and market world-class automobiles for the mutual benefit of both partners.

The alliance provides the potential for MG Rover derived cars to be manufactured in China, including those that will be jointly developed. This will include the new medium-sized car, for which the styling direction was previewed at the Geneva Motor Show. Plans have also been put into place for the joint development of a new small car and consideration will be given to the development of additional new models. Equally the opportunity also exists for MG Rover to manufacture and market CBIH derived vehicles.

The companies will co-operate on the supply and manufacture of engines and development of a new range of engines.

MG Rover will provide considerable technical support and assistance in order to establish the necessary manufacturing processes and systems in China. This will extend to the establishment of a joint Research and Development centre in China.

The alliance will seek significant cost benefit from larger manufacturing volumes, going forward. A joint component sourcing strategy committee will be established in order to maximise the economic benefit of the companies' combined purchasing.

The alliance will enable both partners to grow more quickly, than would otherwise be possible because they will benefit from each other's strengths. It has been structured in a way that MG Rover and CBIH both benefit financially from combined alliance sales.

Kevin Howe, MG Rover, Chief Executive said: "This is a wide-ranging global alliance that spans the full breadth of both company's activities, and presents many opportunities. I am delighted that we have so much in common. Brilliance has achieved quite outstanding results in a very short space of time and demonstrates world class standards in everything it does. It is clearly the leading automotive manufacturer, in the world's fastest growing car market.

"China will be one of the most important markets for the alliance. It is the world's fastest growing market for cars. The alliance can move quickly into a position where it can fully exploit this market's potential."

Dr. Brian X. Sun, Chief Executive, CBIH said: "From the beginning it was very clear Brilliance and MG Rover have a similar philosophy and operating style. We are both ambitious, clear in our vision and quick with decision-making.

"Equally important is the fact that MG Rover and CBIH do not have products that compete directly, which means we can take the full benefit from our alliance, without our plans conflicting in any way.

"Benefit will be derived from large economies of scale, which will spread development costs for new products over bigger volumes, and increase purchasing power for components, which will in turn make our products more competitive.

Together we will be a force to be respected in the automotive industry."

The alliance creates the potential for much greater global reach and scale. Market territories have been assigned to each partner. Vehicles can be manufactured and sold exclusively by CBIH in China, and the majority of Asia and Africa. MG Rover will have exclusivity in all other markets, however consideration will be given to combining efforts in the USA.

A new joint venture company will be created. Ownership of the company will be shared 50/50 between MG Rover and CBIH. Three directors from MG Rover and CBIH will form the board. They will oversee the collaboration and manage alliance objectives. There will be no exchange of equity between MG Rover and CBIH, however both parties will invest substantial resources into ensuring the success of the alliance.

Discussions between MG Rover and CBIH began in the second half of 2001. In December a statement was issued outlining the scope of the proposed Alliance. Today, both MG Rover and China Brilliance are very pleased to announce that agreement has been reached.

About China Brilliance Industrial Holdings.

The Chairman of China Brilliance Industrial Holdings, Dr. Yang Rong, heads a group that comprises of eight Chinese companies, with listings in New York, Hong Kong and Shanghai.

The principle business of the group is vehicle, engine and component manufacturing and sales. It has an annual turnover in the region of $2.8 billion and significant global reach within the automotive industry, co operating with many of the world's most significant players including Toyota, General Motors, ***, London Taxi International, Mitsubishi and Renault.

The group employs 40,000 people, in seven fully integrated vehicle manufacturing facilities, three self-contained engine plants and in component manufacturing, in China.

Annual production for 2002 will approach 150,000 units. The group's products include minibuses, sedans, SUV's and pick-ups, light trucks and the legendary London black cab.

The group has some notable firsts. Brilliance China Automotive Holdings was the first ever Chinese company to be listed in an overseas stock exchange. Jinbei Passenger Vehicle Manufacture Co Ltd, is China's largest minibus producer.

The group's three engine manufacturing companies comprise China's largest producer of engines for light-duty vehicles.

Although the focus of the business has been on minibus production and sales, based on a version of the Toyota Hiace, it is intent on expanding into the growing sedan segment in China. The company will launch its Zhonghua sedan in the second half of 2002. It is the first vehicle to be designed and developed entirely by a Chinese automotive company. The group is also developing an MPV.

The group now employs more 3000 engineers.

It is also developing a family of advanced engines with FEV, in Germany. They will be manufactured in China, in brand new state of the art facilities, in volumes approaching 500,000 units for the group's vehicles and sale to other manufacturers.

The group's total investment to date, in vehicle and engine design and manufacturing exceeds $2 billion.

About MG Rover

The structure of MG Rover, an independent, medium-sized British company, reflects a corporate focus on the development of a fully integrated automotive business. Its aim is to create great cars, from great brands.

The company was formed following the purchase of the Rover Group from *** in May 2000. The total group has an annual turnover in the region of £2 billion and employs 6500 highly skilled and dedicated people.

The largest business within MG Rover is MG Rover Group, which designs, develops and manufactures cars at its Longbridge, Birmingham site in the UK. Its products are sold world-wide in 70 markets, with approximately 50 per cent of sales in export territories.

In Powertrain Ltd, MG Rover Holdings has a business that manufactures engines and gearboxes, from the same Longbridge site. MG Rover Parts Ltd will provide a world-wide after sales supply operation to the MG Rover dealer organisation.

MG Rover Holdings also includes MG Sport and Racing Ltd, MG Rover Property Ltd and MG Heritage Ltd.

 
G

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This is most definitely good news for MGR - economies of scale - larger production runs - thus more profit = investment for the future. :D
 
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