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Chery said to resume float plan
Jin Jing
CHERY Automobile Co Ltd has restarted plans to float its shares on the stock market to fund its aggressive expansion plan by possibly swapping shares with Jianghuai Automobile Co Ltd.

The country's sixth largest carmaker is preparing for a listing program after a two-year suspension, according to a company source yesterday.

"But it is meeting difficulties over the issue of an initial public offering because assets and profitability are not attractive enough to lure investors," the source, who wished to remain anonymous told Shanghai Daily.

Chery, which specializes in rolling out self-developed models, sold 41,000 units in the first two months of this year, up 111 percent from a year earlier.

However, its profit margin was around 1 percent as its mainstream model, the Chery QQ sub-compact models that come with a 500 yuan (US$62.5) profit each, contributed to over 50 percent of its sales.

The Anhui Province-based company plans to exchange shares with the Shanghai-listed Jianghuai Auto during an ongoing restructuring plan for going public scheduled for next year, according to the 21st Century Business Herald yesterday.

The share exchange has been submitted to the state-owned assets regulator for approval, the paper said, adding that the deal was arranged by the Anhui provincial government, which is considering consolidating its auto industry to boost its development.

Chery could not be reached for comment yesterday.

Wang Ming, a spokesman for Jianghuai Auto yesterday denied the reports.

Zhang Xin, an analyst from Guotai Jun'an Securities Co Ltd, said: "Both companies would benefit if they held stakes in each other as Jianghuai would gain access to making passenger cars while Chery would also have more competitive assets."

Chery and Jianghuai signed agreements in March this year to share the sourcing of auto parts as well as joining hands on vehicle research and development.

Chery, which is jointly controlled by several state-owned companies, started its listing program in 2004, but it was suspended due to sluggish sales and tightened macro control by the end of 2004.

The company has accelerated its expansion by establishing its auto research institute, building more manufacturing facilities and setting up sales channels on the overseas market, which need an estimated 5 billion yuan.
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