Dongfeng-FAW Merger Ahead?

Dongfeng Motor Group and FAW Group Corp. may be heading toward a merger, according to the China Daily.

Both state-owned companies suspended training on Tuesday after the newspaper suggested Xu Ping, who has been chairman of Dongfeng for a decade, will swap that role for the chairmanship of FAW. Dongfeng confirmed the report late Tuesday.

Last month the Communist Party's disciplinary committee said FAW's previous chairman, Xu Jianyl, was being investigated for corruption.

Meanwhile, media reports say former FAW Chairman Zhu Yanfeng will assume the same role at Dongfeng. Analysts say Zhu, currently deputy party secretary of Jilin province, is considered a dealmaker within the Chinese auto industry.

Dongfeng current has carmaking ventures with Honda, the Renault-Nissan alliance and PSA Peugeot Citroen, in which it holds a 14% equity stake. FAW operates joint ventures with General Motors, Toyota and Volkswagen.

Dongfeng and FAW sold a combined 7 million vehicles in 2014. Merging the two would replace SAIC Motor Corp. as China's largest carmaker. The FT notes that China's central government has been pushing the country's auto industry to consolidate into 6-8 large carmaking companies.