Shanghai Automotive Industry Corp (SAIC) has again extended an olive branch to Nanjing Automobile Corp (NAC), SAIC's bidding rival for the MG Rover project two years ago, in a move that's believed to result in a merger of the two automakers.

SAIC Chairman Hu Maoyuan told a shareholders' meeting last week that both SAIC and NAC hope to best utilize the domestic and global resources, cooperate and complement each other and avoid redundant construction.

Hu also said both Shanghai and Nanjing governments have supported the move. Shanghai Vice-Mayor Hu Yanzhao led a delegation to Nanjing two weeks ago to work it out.

The central government, which has been pushing for consolidation of Chinese automakers, has also endorsed a merger.

While both SAIC and NAC have been talking about cooperation, no tangible progress has been made so far.

NAC Chairman Wang Haoliang, former deputy Party chief of Nanjing, had earlier said his company never shut the door for cooperation with SAIC. He said NAC wishes to jointly run the MG Mingjue project. Negotiations will determine if NAC will give up the controlling stake in the project.

Shanghai-based National Business Daily reported that a central government document about the merger of SAIC and NAC has already reached the Shanghai Municipal Government. The document ratified NAC as the base for MG Rover production, without clarifying the exact stake of each side.

Industry analysts say the upcoming merger will create a win-win situation for both. While it will make both automakers more efficient, it will help NAC ease its financial strains in expanding MG production and help SAIC better tackle the world market with the MG brand.

The two automakers vied for Britain's automaker MG Rover in 2005. While NAC won MG Rover's fixed assets such as production lines and technology, SAIC got its design blueprints for two car models - Rover 25 and Rover 75 - as well as the intellectual property rights for all Rover auto engines.

With Rover technology, SAIC launched its Roewe model last year and started marketing the sedan early this year.

NAC also started selling its Ming Jue sedans three months ago. It's a sports model based on MG technology.

(China Daily June 27, 2007)