An application for merger between Yulon Motors Co., Ltd. and General Motors China, Inc.

Chinese Taipei

Case:

An application for merger between Yulon Motors Co., Ltd. and General Motors China, Inc.

Key Words:

automobile, joint venture, merger

Reference:

Fair Trade Commission Decision of April 7, 2005 (the 700th Commissioners' Meeting)

Industry:

Motor Vehicles Manufacturing (2931)

Relevant Laws:

Article 6 (1) (iv), Article 11 (1) (iii), and Article 12 (1) of the Fair Trade Law

Summary:

1. General Motors Corp. of the US is the world’s renowned automaker. Its product lines and marketing channels are found all over the world. After its contract carmaker and sales representative in Chinese Taipei, Taiwan’s Chinese Automobile Company encountered a financial crisis, General Motors has devoted efforts to look for contract carmaker as well as to enhance its marketing channel. After considering the fact that Yulon Motor Co., Ltd. (hereinafter referred to as Yulon Motor) is a Taiwanese company that possesses international quality standard, therefore, General Motors plans to tie up with Yulon Motor thru joint venture, that is jointly establishing the Yutung Motors Co., Ltd. (hereinafter referred to as Yutung Co.). Under this joint venture plan, GM China Inc. will hold a 49% stake in Yutung Co. and Yulon Motor will control the remaining 51%. The newly established Yutung Co. will be responsible for sales of GM import models and sign contracts with Yulon Motor under which Yulon Motor will manufacture specially designated models in Chinese Taipei on behalf of GM. Therefore, in accordance with the provisions of Article 6 (1) (iv) and Article 11 (1) (iii) of the Fair Trade Law, the enterprises participating in the merger have filed the application form and related enclosures with the Fair Trade Commission.
   
2. Under this joint venture, both parties will hold more than one third of the stakes of the newly established Yutung Company, however, as indicated in the joint venture contract, both parties in the joint venture, in addition to the ordinary shareholder relations, also must assist the joint venture company to integrate the marketing channels, select sales representatives and sign sales representative agreements together. The assembly operation of GM will be subcontracted to Yulon Motor through the joint venture company. Hence, the nature of joint cooperation on a regular basis is found in the cooperative relations between Yulon Motor, GM China, Inc, and Yutung Co. Looking at the nature of their cooperation, such combination has met the definition of merger as prescribed in Article 6 (1) (iv) of the Fair Trade Law. In addition, the total sales of Yulon Motor in 2003 is approximately NTD 37.4 billion; the total sales of GM China Inc. to Taiwan through its subsidiary company General Motors Taiwan is approximately NTD 1.7 billion in the year 2003; the total sales of both enterprises have already met the threshold of filing application for merger as stipulated in Article 11 (1) (iii) of the Fair Trade Law. It is found that all documents related to this merger are completed and thus a report of merger must be filed with the Fair Trade Commission.
   
3. After this merger, it would be advantageous for Yulon Motor to obtain GM’s contract orders. Furthermore, although the combination between GM China Inc. and Yulon Motor is a horizontal merger, nevertheless, the marketing channels of GM model series, instead, by means of this merger, may be expanded. Moreover, this horizontal merger will not reduce the number of competitors in sedans market and in addition, the market concentration of domestic sedan industry is considered as moderate. Furthermore, this merger has established a new enterprise, hence only has limited negative impacts on market competition and competition structure. In conclusion, the overall economic benefit of this horizontal merger outweighs the disadvantages resulted from competition restraint. Accordingly, pursuant to the provision of Article 12 (1) of the Fair Trade Law, this merger is not prohibited and an advanced merger notification will not be issued.

Summarized by Lai, Shu-Ching;
Supervised by Liou, Chi-Jung

Appendix:

Yulon Motor Co., Ltd.’s Uniform Invoice Number: 03489200
General Motors China, Inc’s Uniform Invoice Number: Nil