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Tribune News Service
Tribune News Service
Business
Breana Noble

Stellantis to dissolve joint venture with GAC, import Jeeps to China

Jeep maker Stellantis NV is dissolving its money-losing joint venture with its Chinese partner and instead will import the iconic SUVs into the world's largest autos market.

The breakup with Guangzhou Automobile Group Motor Co. Ltd. offers a refresh for one of the world's largest automakers trying to make inroads into a market where neither Fiat Chrysler Automobiles NV nor French automaker Groupe PSA had a strong foothold prior to their merger last year to create Stellantis. The transatlantic company's sales there represent less than 1% of the market.

The decision is a detour from plans shared in January. Stellantis said it would increase to 75% its share in the 50-50 venture formed in 2010. The announcement caused a rift with GAC, which said it didn't know about Stellantis' plans to announce the ownership modifications.

Because of "a lack of progress" on that deal, Stellantis said Monday it's abandoning the partnership for an "asset-light" approach of importing Jeeps, especially as it electrifies its lineup, to be sold through Chinese dealers. Stellantis used that same wording in March to describe its approach to the Chinese market, where it seeks $22 billion in net revenue by 2030.

"Dissolving this partnership will allow them to rethink what they want to do, making it a longer play, potentially finding a better suitor than GAC," said Sam Fiorani, vice president of global forecasting for AutoForecast Solutions LLC. "But that's more long-term than the next six months."

The termination of the partnership, Stellantis said, will result in a non-cash impairment charge of approximately $303 million (297 million euro) in its first half 2022 results, which will be shared next week.

With GAC, Stellantis had produced the Jeep Cherokee, Renegade, Compass and Grand Commander, which was designed for China. Although the brand had been an early entrant in the mid-1980s, its modern vehicle failed to catch on amid increasing competition, Fiorani said.

With China opening the way for foreign automakers to manufacture and sell within its borders without a domestic partner, Stellantis may be able to take advantage of going it alone, he said, "which would give them more control of their destiny and higher percentage of their profits in the country."

With around 9 million annual SUV sales, Jeep has plenty of potential in China, especially if it can clarify its positioning and shoot for being an iconic American premium brand, said Michael Dunne, a former General Motors Co. executive who is now CEO of Hong Kong-based advisory firm ZoZo Go LLC.

"You see Jeep T-shirts and Jeep apparel," he said. "They love the brand. It's just for the products and partnerships, the stars have never been quite aligned."

He added that even with long-standing tariffs on imported vehicles to China, competitors like BMW, Mercedes-Benz and Lexus have been able to find success: "They can get it done," Dunne said.

The announcement of the joint venture's demise follows an announcement on Friday that Stellantis' other Chinese partner, Dongfeng Motor Corp. Ltd., possibly could sell its remaining 3.16% stake in the company. The investment dates to a holding in PSA under which the companies make Peugeot and Citroën vehicles.

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