UPDATE 1-Ford, Mazda aim to break up 3-way China JV-sources

* Ford, Mazda, Changan to end 3-way tie

* Ford, Mazda each to set up separate venture with Changan

* Mazda seen as biggest beneficiary of the move

* Ford’s exit from 3-way tie unrelated with Volvo sale
(Adds quotes of sources, analysts, details, background)

By Fang Yan and Jason Subler

SHANGHAI, May 13 (BestGrowthStock) – Ford Motor (F.N: ) and its China
venture partners, Mazda Motor Corp (7261.T: ) and Chongqing Changan
Automobile Co, are seeking Chinese government approval to end
their three-way tie up, two sources said on Thursday.

Ford and Mazda both plan to set up their own separate joint
ventures with Changan (000625.SZ: ), a move which will give the
automakers more leeway to design their own China strategies, the
sources with direct knowledge of the scheme told Reuters.

Ford is set to own half of its new two-way venture with
Changan, the sources said, while the Mazda-Changan tie-up will
probably also be a 50-50 JV.

“They have submitted a joint proposal to the Chinese
government to split up the partnership. Ford’s new JV with
Changan will be based in Chongqing, while Mazda’s venture will be
based in Nanjing,” said one of the sources, adding that it was
unclear when the government was expected to make a decision.

Ford and Changan declined to comment on the issue. A Mazda
China spokeswoman had told Reuters the parties were awaiting
regulatory approval for a restructuring move, but declined to
give further details. [ID:nTOE64603F]

Auto industry partnerships have been in focus recently, with
Renault (RENA.PA: ), Nissan (7201.T: ) and Daimler (DAIGn.DE: )
announcing a stake swap deal in the wake of an equity tie between
Suzuki Motors (7269.T: ) and Volkswagen AG (VOWG.DE: ).
[ID:nLDE6361D5]

Mazda’s ties with Ford have weakened since the U.S. automaker
reduced its controlling one-third stake in Mazda to 13 percent in
2008 to free up cash. Ford currently owns about 11 percent of
Mazda, Japan’s No.5 automaker.

Ford, which broke ground for its $490 million third China
plant in September last year, owns a 35 percent stake in the
venture, with Changan holding 50 percent.

BENEFICIARY

A pullout of Mazda could actually be positive for the
Japanese automaker, which has just a 15 percent stake in the
venture, analysts said.

“It’s a good move as a three-way tie could get complicated
sometimes. The biggest beneficiary, however, would be Mazda as it
could be an equal partner in the new tie,” said Chen Liang, an
analyst with Huatai Securities.

China, which eclipsed the United States as the world’s top
auto market last year, has been a major bright spot amid a global
industry downturn and a safe heaven for foreign auto giants.

Car sales rose 63.6 percent to 4.63 million units in the
first four months, with annual growth estimated to rise between
15 to 20 percent.

Mazda started making the Mazda 6 in China in March 2003
through a technical cooperation pact with FAW Group, China’s No.
2 automaker.

It joined Ford’s car making venture with Changan three years
later, which now makes Mazda 2 and Mazda 3 compact cars as well
as Ford’s Focus, Fiesta, Mondeo, S-MAX, Volvo S40 and S80 models.

The termination of the Changan-Ford-Mazda partnership is
unrelated to Ford’s plans to sell its Volvo car unit to China’s
Zhejiang Geely Holding Group Co, parent of Geely Automobile
Holdings Ltd (0175.HK: ), one of sources said.

Ford signed a $1.8 billion deal to sell the Swedish premier
car brand to Geely in late March and is expected to close the
sale in the second quarter. [ID:nLDE62R08N]

Stock Report
(Editing by Jacqueline Wong)

UPDATE 1-Ford, Mazda aim to break up 3-way China JV-sources