China car maker plans buys, moves up market

(Adds details, executive's comments)

By Alison Leung

HONG KONG, July 13 (Reuters) - Geely Automobile Holdings Ltd. (0175.HK) plans to take over four car plants worth nearly US$500 million and set up another, as the ambitious Chinese firm expands, streamlines its structure and revamps its product slate.

Geely wants to shed its image as a maker of cheap cars by investing heavily in research. The firm hired former Chrysler executive Frank Zhao last year to head up a research effort it hopes would propel its nascent drive to sell cars abroad.

Geely, a private firm founded by entrepreneur Li Shufu that sells some of the country's cheapest automobiles, has 15 new models in the pipeline, executive director Lawrence Ang said on Friday.

And the firm -- which is in discussions to set up assembly plants across the Americas, Europe and Africa -- is working on an engine that would help it meet the latest European emissions standards.

"We started from the production of cheap and simple small cars and now we want to enter a phase of technological leadership and good quality," Li told reporters.

"Our development strategy is now in a transitional phase," he added.

For now, the firm wants to concentrate on simplifying a corporate structure with tendrils in a number of factories controlled by its unlisted parent of the same name.

Geely intends to increase its stake, to 90 percent, in four existing plants that had a combined net asset value of HK$3.65 billion (US$467 million) as of the end of 2006. Its parent would own the remainder.

Executives said the company would eventually own 100 percent of those factories, but with no clear timeframe in mind.

Taking over the factories would allow the Chinese firm to consolidate profits at those plants into its bottom line.

And by the end of the year, Geely hopes to own 90 percent of another plant its parent is building in central China.

The firm will sell new shares to its parent to fund all the purchases, executives said. Details would be unveiled later.

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