Chinese officials have picked General Motors as the favorite to replace Automobiles Peugeot of France as the foreign partner in a failed joint venture in the southern city of Guangzhou.
According to industry sources in China and Europe, the partners in the venture - Guangzhou Auto Group Corp. - will meet Tuesday to formalize Peugeot's withdrawal from the venture.
GM will then step in to begin negotiating project details with city and provincial authorities and China's central government. A final agreement is expected to take several months to complete.
If approved, the takeover of the Guangzhou venture would make GM a rival to Volkswagen AG as the biggest foreign investor in China's automotive sector. Volkswagen is managing partner in China's two biggest carmaking ventures, FAW-Volkswagen in Changchun and Shanghai Volkswagen in Shanghai.
Peugeot owns 22 percent of Guangzhou-Peugeot, and Guangzhou Automobile controls 46 percent. Banks and other investors own the rest. GM wants more than Peugeot's share, insiders said.
Korea's Hyundai Motor Co. also was a finalist in the bidding. But GM has signed a memorandum of understanding with the Guang-zhou municipal government to become the sole negotiating partner, insiders said.
'We are confident,' said a GM insider. 'We feel China would like to cooperate. It may be easier to get approval for this project than another because we are replacing another company.'
GM wants to assemble Opel Astras or Vectras at the plant, company insiders said.
The factory can produce 100,000 cars a year, although Peugeot never approached that number. GM also has proposed to build a new 150,000-unit engine plant as part of the deal.
In March, GM signed a $1.6 billion agreement to build about 100,000 Buicks a year at a greenfield plant in Shanghai. It also is negotiating an agreement with First Auto Works to produce the Chevrolet Blazer at their moribund light-truck venture in Shenyang, northeast China.
General Motors executives in Europe said they view Guangzhou as a chance to set up Opel production in China easier and sooner than by seeking approval for an all-new industrial project.
A GM delegation and senior Chinese officials have been negotiating in Beijing in recent weeks.
Peugeot established the joint venture in 1985, and two years later began building 505 sedans and 504 wagons. But the joint venture has been plagued by manufacturing and marketing problems, and production ended last year. Peak output was 21,000 units in 1993. Altogether, about 100,000 Peugeots were built.
Peugeot's parent, PSA/Peugeot-Citroen SA, is expected to shift Guangzhou's production to its other plant in China, Dongfeng-Citroen Automobile Co. Ltd., in Wuhan. That venture, opened in 1994, produces the Citroen ZX-series compact sedan and the ZX-based Fukang.