(Adds analysts comments, details)
SHANGHAI Jan 23 China's biggest automaker SAIC
Motor (600104.SS) and its smaller peer Chongqing Changan Auto Co
(000625.SZ) warned on Friday about a sharp drop in 2008 net
profit as a slowing economy curbs automobile demand.
SAIC Motor expects a more than 50 percent fall in unaudited
net profit in 2008, hit in part by its investment in South
Korea's Ssangyong Motor Co (003620.KS), which has filed for
bankruptcy protection due to severe liquidity problems.
Ssangyong, 51.33 percent owned by SAIC, posted four
consecutive quarterly net losses as auto demand plunged amid a
deepening global recession, forcing its Chinese shareholder to
put aside "a significant amount of provision".
SAIC did not specify the size of provisions, but said earlier
this month that exposure for its stake in Ssangyong was estimated
at 1.85 billion yuan ($270.5 million) under Chinese accounting
standards as of the end of November.
In a separate statement, Changan Auto, Ford Motor's (F.N)
China partner, said unaudited 2008 net profit was at roughly
38.93 million yuan, down from 666.89 million yuan a year earlier.
"Obviously a sharp slowdown of China's car market played a
big role in the weak earnings. Troubles with Ssangyong make life
even harder for SAIC," said Zhang Xin, a senior industry analysts
with Guotai Junan Securities.
SAIC, a Volkswagen AG (VOWG.DE) and General Motors (GM.N)
partner, sold 1.72 million vehicles in 2008, data showed. It sold
1.69 million vehicles in 2007, up 25.8 percent from a year ago.
Changan Auto makes cars in a three way tie-up with Ford and
Mazda Motor (7261.T). It was hit badly as car sales at the
venture fell 5.9 percent this year, after a 60 percent jump in
However, not all auto manufacturers have been affected by the
FAW Car Co 000800.SZ, a unit of one of China's three
largest auto makers FAW Group, said on Friday its 2008 net profit
rose 90 to 120 percent to 1.05 billion-1.20 billion yuan, boosted
by expanded sales and production.
Analysts attributed the earnings jump to brisk demand for its
self-developed mid-sized Besturn sedans and Mazda 6 models, which
are competitively priced against rival brands.
"FAW Car's performance is not surprising at all. It could
still hold out much better than most of its peers this year due
to the popularity of Besturn and Mazda 6," said an analyst with
FAW Car said last year it planned to invest 2.36 billion yuan
to boost its internally developed car brands, adding 200,000
units of annual capacity for its own-brand cars by 2012, up from
It shares, traded in Shenzhen rose 4.2 percent to 8.65 yuan
by midday, outperforming a 0.2 percent decline in the benchmark
SAIC rose 2.03 percent to 6.03 yuan and Changan Auto has
suspended trading since early October pending an announcement.
(Reporting by Edmund Klamann and Fang Yan, Editing by Jacqueline