Albury transmission-maker saved for $47.4 million

CHINESE car-maker Geely Automobile Holdings has snapped up financially troubled Australian transmission-maker Drivetrain Systems International (DSI) for $47.4 million, saving the jobs of the 168 remaining workers.

Cashed-up Geely, one of the smaller Chinese vehicle manufacturers, is expected to offer Albury-based DSI a sound future and rising production volumes as it brings its aggressive model program to market over coming years.

A Geely spokesman told the Hong Kong Stock Exchange in a news release that the acquisition was strategically important to the group, given DSI’s design and manufacturing capabilities in automatic transmissions.

“The group plans to use DSI to supply some of the group’s in-house requirements for automatic transmissions as well as the requirements of other automobile manufacturers,” the spokesman said.

That last statement will come as a relief to Ford Australia, which buys the DSI four-speed automatic transmissions for its LPG Falcon and rear-wheel-drive Territory. The Ford contracts runs to June, 2010.

In good news for Albury, Geely sees a strong future for the plant, which was established by US company Borg-Warner about 40 years ago.

“The management believes that there is substantial room for growth in the group’s sales once more vehicle models equipped with automatic transmissions could be offered,” the Geely spokesman said.

Left: The Geely GT.

In China, almost 40 per cent of cars are fitted with automatics, but for Geely, the proportion is “only a few per cent”.

The announcement to the stock exchange showed that DSI was a profitable company while its contract with Korean car-maker SsangYong was in operation.

The Geely press release said DSI made $A6.8 million in the year to June 2007 and $5.1 million for the year to June 2008.

It was the fall of SsangYong into bankruptcy, and the ceasing of deliveries to the Korean manufacturer, which prompted DSI’s fall into receivership in February. SsangYong represented about 60 per cent of its business.

Geely made about 185,000 vehicles in 2008 but has plans for a raft of new models.

It plans to move up-market. Its chairman, Li Shufu, said three weeks ago Geely would cease making cars that cost less than 40,000 yuan ($A8500).

The company will roll out its first “high-end” cars in June as part of a four-model program over the next 12 months.

It will release the FE-1 and FE-2 hatchbacks with 1.8-litre and 2.0-litre petrol engines and a 2.0-litre diesel. The GC-1 2.0-litre sedan and the NL-1 2.4-litre SUV will follow in 2010.

These four models will be priced between 100,000 yuan ($A21,200) and 150,000 yuan ($A31,800).

Geely is well cashed up. Earlier this month it redeemed all of its outstanding convertible bonds for an outlay of $HK318 million ($A59.5 million).

“We'll have more than $HK1 billion cash on hand after the redemption and will continue to identify acquisition targets," executive director Lawrence Ang told Reuters.

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