Sokon unit buys US car assembly plant for $110m

SF Motors, an auto company in southwestern China's Chongqing, has signed an agreement with US heavy vehicle and contract automotive manufacturer AM General to buy the latter's commercial assembly plant, or CAP, for $110 million.

Based in South Bend, Indiana, AMG is best known for the Hummer, its civilian vehicle, and the Humvee, the military heavyweight.

Under the agreement, SF Motors, a subsidiary of Chongqing Sokon Industry Group, will acquire the land, plant and certain auto manufacturing equipment of the CAP.

The deal does not impact AMG's separate military vehicle assembly plant or its core military vehicle business.

Sokon started as a mechanical springs factory in 1986 in Banan District, Chongqing. It is now one of China's leading manufacturers of engines and new energy cars.

It focuses on sport utility vehicles and mini passenger vans.

Its subsidiary SF Motors is headquartered in Silicon Valley, California, and specializes in the design and production of US-based clean electric vehicles.

"Once the purchase is completed, it will help us enhance our advanced manufacturing and management systems as well as increase our manufacturing experience in developing the US-based clean energy car project," Sokon said in a filing to the Shanghai Stock Exchange.

"It will also help upgrade our current manufacturing business, improve the quality of our products and then boost our sales."

SF Motors expects to retain all of the CAP's 340 jobs which "would have otherwise been lost when the CAP's sole remaining customer contract expires later this year and would have resulted in a line shutdown", according to news release of AMG on Thursday.

"We are confident that SF Motors is the right long-term owner to support the CAP, as well as the South Bend community and the state of Indiana," said Andy Hove, AMG's president and CEO, in the news release.

The deal is subject to customary closing conditions, including receipt of US and Chinese regulatory approvals.

"This purchase will help Sokon to speed up its production of electric cars in the United States," said Bill Peng, a partner of Strategy&, a US consulting firm.

"Sokon will probably become the first Chinese company to produce vehicles in the US and the deal has shown the fighting spirit of Chinese private companies."

In 2009, Sichuan Tengzhong Heavy Industrial Machinery Co Ltd tried to buy the Hummer from General Motors. But, the next year, the Chinese Ministry of Commerce rejected Tengzhong's bid.