Ford, Mazda, Changan Cleared to Split Venture

The Chinese government has given final approval for the Changan Ford Mazda Automobile Co. joint venture to dissolve and create two new entities.

The partners have been awaiting permission since May 2010 to break up the three-way venture, which is 50% owned by Chongqing Changan, 35% by Ford and 15% by Mazda. The partnership sold 418,600 vehicles in China last year more than three-quarter of them badged as Fords.

The three companies will now create two separate 50:50 joint ventures that pair Changan with Ford and Mazda, respectively. The trio says it will continue to cooperate at a strategic level in unspecified areas of mutual benefit.

Ford initiated the breakup because it was winding down its equity stake in Mazda from 33.4% in 2008 to 3.5% by the end of 2010. The pair no longer co-develop vehicles or need to coordinate their activities in China. Analysts say the new arrangement will allow Ford to book a larger portion of the venture's results.

Changan-Mazda intends to build small cars the existing factory in Nanjing that currently makes Mazda models.

Changan-Ford Automobile will produce Ford-brand vehicles at two assembly plants in Chongqing, a third $600 million facility being constructed there and a $750 million car factory in Hangzhou scheduled to open in 2015.

Changan and Ford expect to double their annual capacity in China to 1.2 million vehicles by 2015 from 2010 levels. The U.S. company has said it aims to expand its dealer network in the country to 680 outlets during the same period.