The three-way Changan Ford Mazda Automobile Co. joint venture in China will be restructured into two individual units by 2012, The Nikkei reports. The move reflects the growing split between Ford Motor Co. and Mazda Motor Corp. after Ford reduced its ownership in the Japanese company to 13% from a controlling one-third block two years ago.

Citing unnamed company sources, the newspaper says Chongqing Changan Automobile Co., which owns 50% of the current company, will form separate 50:50 ventures with Ford to run the Chongqing plant and Mazda to operate the Nanjing plant. Ford vehicle output in Nanjing will be relocated to Chongqing, and Chongqing Mazda production will be moved to Nanjing.

The three companies launched joint production in Chongqing in 2006. Output in Nanjing was added a year later. Mazda plans to expand the capacity in Nanjing by 25% to more than 200,000 units in coming years, The Nikkei says.

A basic agreement between the three companies has already been reached, according to the newspaper. It says they plan to file for approval with the Chinese authorities within the next month, and begin the restructuring process soon thereafter.

GAZ Group President Bo Andersson says the Russian truckmaker needs help from a foreign partner to upgrade its outdated production system and is in talks with at least two firms to do just that.

Andersson says GAZ also is interested in partnerships to help build its fledgling passenger vehicle business, although that is a secondary goal for now. GAZ was the industrial partner in Magna International Inc. and Russia’s OAO Sberbank’s bid to buy General Motors Co.’s Opel unit. Some media reports suggest that GAZ’s involvement was one of the primary reasons why GM decided to keep Opel instead.

Andersson joined GAZ last summer from GM, where he was vice president of global purchasing. Since then, he has focused on streamlining the massive company by closing plants and shedding workers. GAZ also is struggling to restructure its $1 billion of debt.

GAZ is owned by billionaire Oleg Deripaska. Last year the company built 90,000 vehicles vs. 285,000 units in 2007.

Vietnam set an all-time record for new car sales last year, with volumes climbing to about 191,300 units from about 151,400 in 2008.

The increase was fueled by a 51% surge in imported vehicles, which totaled 76,300 units last year, according to the Vietnam Automobile Manufacturers’ Association. Sales of domestically produced models by the 17-member group grew 3% to 115,000 units last year, according to preliminary data.

Last year’s growth was due mostly to government tax incentives and an economic recovery that began in the third quarter. Analysts say sales of domestically built vehicles are likely to fall by 5,000-10,000 units this year as incentives expire. The government also may raise registration taxes in urban areas in an attempt to curb growing traffic congestion.

Car and light truck sales in Russia fell to a four-year low of 1.47 million units, reports the Assn. of European Businesses. The total is a four-year low and about half of 2008’s record volume of 2.9 million units.

Sales, depressed by economic recession, also were hampered by tight credit, unfavorable currency exchange rates and higher tariffs on imported cars. To stimulate sales, Moscow is enacting a car scrappage program in March that it hopes will generate 200,000 sales this year. The AEB is less optimistic. It anticipates that the initiative, which will pay motorists $1,700 for turning in a car that is at least 10 years old and buying a Russian-built domestic or foreign brand vehicle, will merely hold sales equal to last year’s level.

Nine of the 10 top-selling nameplates last year were built in Russia, according to the AEB. OAO AvtoVAZ’s Lada unit had the four top sellers and remained the country’s most popular brand. Lada was followed by General Motors Co.’s Chevrolet brand. Ford Motor Co.’s namesake marque passed Hyundai and Toyota to move into third place.

Earlier this month AvtoVAZ said it expects to boost output by 50% to 446,000 vehicles in 2010. AvtoVAZ is 25% owned by Renault SA, which has promised to contribute €240 million worth of technology and help the company develop a new small car for its Lada brand.

The Indonesian economy grew 4% last year, behind only China and India among G-20 nations, according to President Susilo Bambang Yudhoyono. He predicts another 5.5% expansion this year, thanks to strong demand domestically and a resurgence in exports. The country’s GDP has grown about 5% to 6% annually over the last five years.

Indonesia’s exports plunged more than 20% last year because of the global recession. Shipments rebounded to near pre-recession levels of $10 billion per month at the end of last year, The Nikkei points out.

But analysts warn that the country will have to make infrastructure improvements to keep the momentum going, beginning with the country’s power plants and highway system.

The country, which is the world’s fourth-most-populous nation, also is trying to attract more foreign investment. That effort suffered last year amid a controversy over whether government officials unfairly profited from a bank bailout.

Although final year statistics haven’t been released yet, new car sales were expanding last fall. General Motors opened eight sales outlets in Jakarta and other cities last year. This follows the addition of nine new stores over the last two years. In December, Honda began exporting its Freed minivan from Indonesia to Thailand. Volkswagen, which launched local production last year, plans to begin exporting from Indonesia to other southeast Asian countries by year-end. Toyota affiliate Hino Motors also is considering exports, The Nikkei says. Hino currently builds a small truck model in Indonesia.

India’s Tata Motors Ltd., which hopes to market its ultra-low-cost Nano minicar in the U.S. within three years, is targeting an $8,000 pricetag for the vehicle—the same price for the European model due next year, reports the Associated Press.

That figure is more than three times the sub-$2,500 base price for a Nano in India. Tata tells the news agency the difference is due to the cost of meeting tougher crash test and emission standards—and upgrades such as a radio and larger engine that western buyers expect. The lowest-priced car currently sold in the U.S. is the $10,000 subcompact Hyundai Accent.

Sister company Tata Technologies Ltd. showed a top-end version of the Nano last week in Detroit, marking the vehicle’s first appearance in North America. Sales in India began last summer following several delays, including the need to relocate production after a land dispute disrupted plant construction.

Singapore-based Tata Tech was involved in the Nano from its initial conception and design through the car’s launch. It worked on advanced engineering, body-in-white, exterior and manufacturing planning, contributing to 18 of the car’s 30-plus patents.

Following a flat 2009, Tata Tech aims to nearly double its business to $500 million within the next three years—about half the total coming from expansion in the U.S. Sales to Tata Motors represented 17% of the unit’s total last year.

At its North American headquarters in Novi, Mich., Tata Tech is in the process of hiring 200 engineers. It currently employs about 600 people in the U.S., including 475 in Novi—and 4,000 worldwide.

The 20-year-old company provides engineering services, product development information technology services and product management lifecycle expertise to most global OEMs. Much of its growth to date has been through acquisitions, including the 2005 purchase of U.K.-based Incat Technologies Inc. Main customers in the U.S. include Chrysler, Ford and Honda.

Volkswagen AG’s Audi unit plans to add production of its A6 sedan and Q7 SUV crossover vehicle at its plant in Kaluga, according to Russian media reports. The facility began making the A4 and A5 cars and Q5 crossover last fall, but the more upscale A6 and Q7 are more popular in Russia. These models account for 80% of Audi’s sales in the country, according to online data service Edmunds.com.

Luxury brands have fared better than the overall new vehicle sales in Russia, which suffered a nearly 50% drop last year. Audi sales were off just 11% last year, while rivals BMW and Mercedes-Benz posted 16% and 32% drops, respectively. By adding local assembly of the A6 and Q7, Audi aims to eventually surpass BMW as the top-selling luxury marque in Russia.

With a presence in India that dates back to the 1960s, Germany’s Schaeffler Group already is in a good position to capitalize on the country’s surging auto market. Schaeffler India President Anil Shah tells AutoBeat ASIA the company aims to strengthen its chances by expanding its production capabilities and opening a new research and development center.

Schaeffler sales will grow by 15%-20% this year, Shah says. About 60% of the company’s business in India comes from the automotive sector, with the remaining 40% generated by other industrial applications.

Schaeffler India represents the company’s LUK, INA and FAG brands. LUK operates a clutch-making facility in Hosur, INA makes engine and transmission parts in Pune and FAG produces ball and roller bearings in Vadodars.

The proposed R&D facility would complement existing design capabilities at all three units and support Schaeffler plants elsewhere in Asia. Shah says the company plans to finalize a location for the center by year-end, perhaps at one of its existing production plants.

Engineers at the center will work to customize Schaeffler’s latest emissions technology for India. This includes the “Co2ncept” system developed with Porsche AG and showcased in a Porsche Cayenne demonstration vehicle. The SUV achieves 10% lower emissions than conventional models by integrating and optimizing component designs. Schaeffler plans to roll out the technology simultaneously in India and Europe.

The group is also in the process of modernizing and expanding its plants. The LUK facility in Hosur will get a new line for hydraulic clutch release systems that will be capable of making 500,000 units per year. INA is doubling the current capacity of 800,000 bearings per year in Pune to ready it for the launch of next-generation bearings.

FAG was the first bearing company in India to introduce advanced hub bearings for passenger cars and claims to be the largest supplier of such systems in the market today. It also exports bearings from India to Asia, Europe and the U.S. International customers include Chrysler, Daimler, Renault, Volkswagen and Volvo.

Malaysian car distributor Naza Group says it has signed separate deals with PSA Peugeot Citroen SA and General Motors Co. to help both automakers expand sales in the country and elsewhere in southeast Asia. The company currently works with Ferrari, Kia and Maserati.

Naza has been Peugeot’s distributor in Malaysia for the past two years, when sales jumped sevenfold to about 1,400 units. PSA predicts sales will double this year, helped by the introduction of the T33 entry-level car that Naza will assemble locally at its Gurun plant. Naza also will begin building three other Peugeot models this year.

Peugeot aims to make Malaysia its regional headquarters for southeast Asia and China, with Naza leading the local effort. The headquarters operations, located in Petaling Jaya, also will train service technicians for the region.

Separately, Naza says it reached an agreement with General Motors Co. to distribute both pre-built and locally assembled cars in Malaysia. GM previously had imported cars into Malaysia through DRB-Hicom Bhd.

GM plans to roll out six to eight new vehicles in Malaysia over the next three years, including some Naza-built models. During this time, it also will expand its dealership network in the area to 25-30 vs. seven today.

Jim Plemmons

The North American automobile industry is beginning to emerge from perhaps its biggest crisis ever. But it won’t be a return to business as normal. Profound changes were unleashed in 2009, and they will continue to ripple through the industry for years. To thrive, companies must continue to be proactive. In many cases, the issues facing companies in the industry’s traditional Midwest base are very different than those in the “new auto industry” of the South.

Dickinson Wright PLLC provides broad legal counsel for more than 200 automotive clients in both regions from its offices in Detroit, Bloomfield Hills, Grand Rapids, Lansing and Ann Arbor, Mich., Washington, D.C., Nashville, Phoenix and Toronto. The firm has an exceptional understanding of the regional and regulatory issues impacting the industry. Its automotive practice is led by Jim Plemmons. He and several members of his team describe issues facing carmakers and their suppliers in the new year and beyond.

What is the single most important thing for the industry to know this year?

Nobody should assume the worst is over. We will have as challenging a 2010 as what we saw in 2009. Restructurings of suppliers’ capacity (decreases) and cost effectiveness (increases) remain to be completed this year and next.

Today’s economic conditions continue to push the auto industry to focus on weak processes that have hurt them. Companies are becoming more sophisticated about the legal side of their business, and they want support in many areas beyond consolidation, workouts and liquidation.

Which are the biggest changes to come out of last year’s crisis?

Government involvement is certainly one of them. The massive loans Washington made to the industry resulted in much more government monitoring, and it has raised questions about how the government will influence the industry in the future.

Taxes are another big issue. Clients are searching for tax breaks, not just ways to plan future tax liabilities. Washington, D.C.- and Detroit-based Dickinson Wright tax expert Will Elwood recently won a major decision in this area concerning the use of R&D tax credits on tooling manufactured and sold to an OEM. Many large accounting firms were telling clients not to claim tax credits on these items, but the new ruling means there is an opportunity for suppliers to file a refund claim.

Intellectual property issues, which have been somewhat ignored while companies struggled with larger economic challenges, are back. Dickinson Wright IP expert Rick Jones is seeing a significant increase in due diligence in this area among companies that use mergers and acquisitions to gain technology. There is more “patent mapping”—checking to see which patents are truly owned by a target for acquisition. Dickinson Wright also helps buyers determine if the technology they seek from another company was developed with government funds. If so, the ability of the acquiring company to capitalize on it may be limited.

International trade issues are another growing area, especially for smaller suppliers who are being pushed to go global. Dickinson Wright international automotive trade and customs expert Bruce Thelen gives an example that an assembly made in Mexico could be treated as Chinese if it contains components from China that define the ‘essential character’ of the final product. We help companies make smart sourcing decisions that can help avoid high tariffs and take advantage of NAFTA and other preferential trade arrangements.

What issues are especially big in the South?

The carmakers in the South are relatively recent arrivals, and some of the issues that northern companies have dealt with for years are new to them. Dickinson Wright Nashville-based automotive attorney Kim Stagg notes that OEMs and their suppliers are making new investments in the South. They want to make prudent investments, and they want to make sure they have processes in place now to avoid problems later.

The traditional Big Three carmaker supply base has become expert in dealing with such issues as Chapter 11 and “363” sales, Stagg continues. However, these are newer experiences for many companies and OEMs in the South. Not long ago a carmaker or tier one supplier rarely did much financial due diligence on a supplier that bid on a contract. It has become commonplace in the North and even with certain new domestic OEMs, but many suppliers in the South are just setting up those processes now.

Similarly, Dickinson Wright automotive contract expert Roger Cummings says suppliers are focusing on avoiding gaps between the terms of their purchase contracts with lower-tier suppliers and the terms they have with their own customers. This includes everything from indemnification and IP rights to contract duration and pricing adjustments.

Has M&A activity peaked in the auto industry?

Volume remains high, but it doesn’t get as much publicity. Companies are definitely cherry-picking facilities because there are so many plants and other assets on the market. There is significant shifting of machinery from unstable to stable suppliers, for example, but it’s mostly behind the scene. There has been a major upswing in stronger tier one and tier two suppliers doing this in the past six months.

To learn more about Dickinson Wright’s automotive practice, please contact Jim Plemmons in Detroit at (313) 223-3106 or e-mail jplemmons@dickinsonwright.com.