|Honda Seals Chinese Joint Venture for Automobiles|
|Tokyo, May 7, 1998 --- Honda Motor Co., Ltd. has announced that on May 7 it signed agreements with the state-owned Guangzhou Auto Group., Ltd. (Head Office: Guangzhou, Guangdong Province, China; President: Zhang Fang You) and Dongfeng Motor Corp. from the private sector (Head Office: Shiyan-city, Hubei Province, China; President: Ma Yue) to form manufacturing joint ventures that will produce and sell Accord automobiles and Accord engines within the Chinese market. This development signifies the final agreement reached between the three parties following several months of discussions subsequent to the initial memorandum of understanding signed in November 1997.
Honda's investment, equivalent to approximately US$200 million, will enable it to establish separate joint venture companies with each of its two new Chinese partners, while also giving it manufacturing and sales rights within China. Honda is providing 50% of the capital being injected into each of the joint ventures - Guangzhou Honda Automobile Co., Ltd. (manufacture and sale of finished automobiles, paid-in capital US$139.94 million) and Dongfeng Honda Engine Co., Ltd. (manufacture and sale of engines, paid-in capital US$60.06 million).
The new joint venture companies will inherit all production and sales/marketing rights for both automobiles and engines as well as acquire buildings and manufacturing equipment owned by the former Guangzhou Peugeot car-manufacturing project.
Both companies are now commissioning the respective sites in parallel to make them ready for pilot manufacturing, due to begin at the start of 1999. Full-scale production is slated to commence in October 1999. The initial manufacturing target is to produce 30,000 vehicles a year, expandable to 50,000 should market demand be sufficient. Under Chinese regulations on automobile manufacturing, the local content of the automobiles produced will initially be 40%, but this is expected to rise year after year.
Outline of Joint Ventures:Guangzhou Honda Automobile Co., Ltd.
Dongfeng Honda Engine Co., Ltd.