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Shanghai GM to take over Daewoo unit in China

Beijing, Feb. 2. (PTI): Shanghai GM, a Sino-US car joint venture, and its two parent companies will merge with itself a huge engine project left over by South Korea's bankrupt Daewoo Motor in east China as part of the company's ambitious plan to conquer the booming Chinese auto market.

The two parent companies - General Motors and Shanghai Automotive Industry Corp (SAIC) - have agreed with creditors of Daewoo motor on the merger of the engine project, president of Shanghai GM, Chen Hong said.

"We are in final negotiations with Shandong provincial government for the merger," Chen was quoted as saying by China Daily.

"Shanghai GM will be responsible for the management of the engine project," Chen said while declining to divulge the financial details.

The merger will be a new step in Shanghai GM's strategy "to make full use of global resources to become an internationally competitive automaker," Chen said.

In 1999, Daewoo Motor and the Shandong provincial government formed a joint venture with a total investment of 7.8 billion yuan ($ 940 million) to produce 1.3, 1.5 and 1.6-litre engines and transmissions in Yantai, a coastal city.

However, the joint venture, with an annual production capacity of 240,000 units, came to a standstill in 2000 due to Daewoo motor's bankruptcy.

The merger was widely anticipated after Shanghai GM, General Motors and SAIC in December 2002 acquired a car plant in Yantai, which was owned by the provincial government and assembled Daewoo's vehicles.

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