June 26, 2007	Tuesday	Jamadi-us-Sani 10, 1428

CHONGQING (China), June 25: Buy a factory in Brazil and move it to China. It is a plan that is as simple as it is sweeping in its sheer scale and ambition, and if anyone can do it, it must be the Chinese billionaire Yin Mingshan - assuming, that is, the Brazilian government will let him.

“Brazil has told us we can buy the factory, but only if we agree not to move it,” said 69-year-old Yin, the founder and chairman of Chongqing Lifan Holdings, a giant in motorcycles now hoping to make money on autos too.

The plant in question is a half-billion-dollar 50-50 joint venture between DaimlerChrysler AG and Bayerische Motoren Werke AG located in Campo Largo, south eastern Brazil, which produces 1.4 litre and 1.6 litre Tritec engines.

Lifan, headquartered in the bustling southwest Chinese metropolis of Chongqing, is among the buyers of the engines, installing them in the 520 compact sedan, which spearheads the company’s foray into autos.

But far from just being a customer, Lifan has long expressed an interest in taking over the plant - apparently without much happening so far.

However, a final decision could be approaching fast, as the joint venture contract between Chrysler and BMW will expire at the end of this month, forcing a decision on what happens next.

The plant stopped production in mid-June, with no announcement made on when output might resume, while the 382 workers were waiting at home, the Brazilian daily O Estado de Sao Paulo reported.

Yin said he could only speculate about the reasons why Brazil was unwilling to let the deal go ahead, but suggested the loss of jobs was the top concern. The joint venture partners were non-committal about the future of the Brazilian plant.

“We are exploring future options for the Tritec joint venture, but it is premature to discuss at this point,” said Trevor Hale, a DaimlerChrysler spokesman.

“It is possible that the current arrangements could be extended beyond the end of the current contract.”

Permission to move the plant is likely to be essential to Lifan’s decision on whether or not to seek a deal, according to analysts.

“If they don’t relocate the factory, but ship the completed engines to China, the costs will be much higher,” said Jia Xinguang, a Beijing-based analyst with China Automotive Industry Consulting and Development Corp.

In a signal of the importance the Chinese government attaches to the deal, talks with Brazil have been carried out not just by Lifan executives but by Chinese officials as well.

“We haven’t talked about a price,” said Yin. “But since the factory is no longer brand new, we expect to have to pay less than the amount that was originally invested by the two joint venture partners.”

Financing the deal would not be a problem, he argued, suggesting that bank credit would be the most likely funding source.

“We live in a world of over-abundant liquidity. We live in a China of over-abundant liquidity. Even relatively backward Chongqing is blessed with over-abundant liquidity,” he said.

Now it is down to the negotiators to reach an agreement, with the main obstacle appearing to be the Brazilian government.

—AFP