(Photo: REUTERS/Steve Marcus)
The top honchos of Daimler AG and BAIC Group are looking into a partnership that they hope will strengthen their auto business as the two car giants expand their operations in China.
A meeting among the companies' senior executives led by BAIC Group Chairman Xu Heyi, and Daimler AG CEO Ola Källenius was set Wednesday to discuss more options on their China expansion program, sources with knowledge of the matter, disclosed.
Among key points to be tackled by the two carmakers is for Daimler AG to hike its investments in its current interests in a majority holding, the sources added.
The new venture, once given the green light, would solidify Daimler AG's foothold in its biggest market, a move that luxury automaker BMW AG also made with local partner, Brilliance China Automotive Holdings, in 2019.
The tandem with the Mercedes-Benz manufacturer is also crucial for the Chinese car company, whose local influence and separate ties with Hyundai Motor Co. have been severely affected by a drop in China's car demand.
Representatives from BAIC and Daimler were not immediately available for comment regarding the meeting between Kallenius and Xu. Sources said there was yet no clear confirmation if an agreement was reached, except to say the two parties are seriously working on one.
Separately, BAIC, a government-controlled entity was said to be planning to raise its interests in Daimler to as high as 9.9 percent from 5 percent to be on par with Chinese rival Zhejiang Geely Holding Group Co.
In 2018, Geely, owned by the billionaire Li Shufu, purchased his stake and became the biggest shareholder of the German luxury car manufacturer.
A push by BAIC to increase its Daimler shares could set the stage for the German company to hike its 49 percent stake in its key Chinese joint venture. In December 2018, Bloomberg News reported that Daimler could own at least 65 percent of shares.
For Daimler's new team of executives, juggling the demands of two opposing Chinese shareholders adds another dimension of uncertainty to an already challenging task of trimming costs to boost narrowing returns at local operations.
The organization has outlined plans to cut more than 10,000 employees and save just over 1.4 billion euros (1.6 billion dollars) in operational expenditures.
Meanwhile, Daimler AG's shares were down 1 percent in pre-market sessions in Germany after the carmaker posted Wednesday that its fiscal 2019 initial profits before tax was pegged at 5.6 billion euros, much weaker compared to the 11.1 billion euros it generated in fiscal 2018.
