TOKYO - Honda has snatched the former Peugeot car plant in Guangzhou, China, from its rival Opel. Both companies wanted to take over the project.
Honda said late last week that it had signed a basic agreement with Guangzhou Auto Group and Dongfeng Motor to set up a joint venture to build Accords at the Guangzhou plant.
Honda said production will start in 1999 at an initial rate of 30,000 cars a year.
The venture is capitalized at $200 million, half of which will be put in by Honda.
Peugeot sold its 22 percent stake in Guangzhou Peugeot Automobile Corp. to the city of Guangzhou for an undisclosed sum. The city is expected to transfer that stake to Guangzhou Auto Group.
Opel had been considered the front-runner to take over the troubled Peugeot plant, which had never produced near its official capacity of 30,000 cars a year.
Opel negotiated with the city government, which was a key shareholder in Guangzhou Peugeot, for months.
Opel also proposed a separate engine-building venture, which would have supplied engines both to the Guangzhou plant and to an Opel plant now being built in Thailand.
Honda announced its coup during a visit to its Tokyo headquarters by Chinese Prime Minister Li Peng.
'Based on this agreement, the three companies will discuss the details of organizing and operating the joint-venture company,' Honda said in a statement.
Honda's existing auto parts venture in China, Dongfeng Honda Auto Parts Co., will be merged into the new Guangzhou venture, Honda said.
Although the city of Guangzhou offers a potentially large market for cars, it suffers from its lack of heavy industry. Guangzhou is a center of light industry, such as textiles.
As a result, many key auto parts manufacturers in China are located much farther north, in Shanghai and Tianjin.
The lack of nearby parts suppliers was a constant problem for Peugeot. Now that it has withdrawn from Guangzhou Peugeot, PSA plans to focus its efforts in China on Citroen's plant in Wuhan, in central China.
Stephane Farhi contributed to this report.