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DE RUEHSH #0015/01 0250330
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P 250330Z JAN 08
FM AMCONSUL SHENYANG
TO RUEHC/SECSTATE WASHDC PRIORITY 8339
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASH DC PRIORITY 0220
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY 0791
RHEHAAA/NSC WASHDC PRIORITY

C O N F I D E N T I A L SHENYANG 000015 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 01/25/2018 
TAGS: ECON EINV EPIT EFIN PROV WTRO CH
SUBJECT: BRILLIANCE EXPANDS FINANCIAL AND COMPONENT 
SEGMENTS AND ADDS A LOW-END PRODUCT LINE 
 
REF: A. SHENYANG 00044 
 
     ¶B. SHENYANG 00155 
     ¶C. SECSTATE 117910 
 
Classified By: Consul General Stephen Wickman reasons 1.4 (b and d) 
 
 ¶1.  (C) Summary.  Shenyang's Huachen Brilliance Automotive, 
which plans to enter the U.S. market later this year, has 
completed negotiations and regulatory steps to establish a 
joint-venture automotive-finance corporation with U.S.-based 
GE Money.  The joint venture will begin operations in China 
by June.  Brilliance is also negotiating with Shanghai 
Automotive Industrial Corporation (SAIC) to establish a joint 
venture to manufacture automatic transmissions for China's 
domestic market, possibly the first such completely localized 
effort.  The Shenyang-based Chinese manufacturer is also 
studying the feasibility of developing a production line for 
its Mitsubishi-engineered engine line and has added a mini 
vehicle to its domestically-sold product line.  End Summary. 
 
Fleet Financing on Track 
------------------------ 
 
¶2.  (SBU) Shenyang's Huachen Brilliance Automotive has 
completed negotiations with GE Money to establish a joint 
venture automotive financial corporation, submitting all 
necessary applications and declarations to the Beijing-based 
China Banking Regulatory Commission.  According to Brilliance 
CFO Lei Xiaoyang, regulators told him the paperwork was 
approved but will not be released until after the upcoming 
Spring Festival.  He said the joint venture company expects 
to finance retail purchases, fleet sales and dealer inventory 
and will open its first office in Beijing in June. 
 
New Strategic Operations 
------------------------ 
 
¶3.  (C) Mr. Lei confided that Brilliance aims to broaden its 
operations to cover all aspects of production and sales.  He 
cited, for example, an agreement between Brilliance and 
Shanghai Automotive Industrial Corporation (SAIC) to 
establish a joint venture to manufacture automatic 
transmissions for China's domestic market, which we believe 
would be the first completely localized production base for 
such transmissions.  He explained that the joint venture 
would sell to any interested manufacturers and would not 
limit its sales to the two parent companies.  Mr. Lei 
revealed that Brilliance and SAIC hope to find a strategic 
partner, preferably from the United States, to join in the 
venture.  He expected the total initial investment to be 
about USD 750 million. 
 
¶4.  (SBU) Brilliance, which returned to profitability in 
early 2007, reported 30 percent growth in both sales and 
revenue for 2007.  According to Mr. Lei, the company will 
reinvest virtually all of the profit to support the new 
ventures and a radically revised product line.  Brilliance 
began production of a new mini vehicle in the final quarter 
of 2007 and is far along in the development of completely 
redesigned sedan lines that will debut in late 2009. 
 
Learning from Europe to Enter the United States 
--------------------------------------------- -- 
 
¶5.  (SBU) Brilliance continues to move cautiously in its 
foray into the American market, a lesson learned after 
European crash tests adversely impacted its once-heralded 
European debut. However, the company quickly recovered, 
achieving a satisfactory test result in a re-test conducted 
three months later.  The company is again contracting out 
major design parts to prominent design houses.  The body will 
be crafted by Ferrari and the suspension by Porsche. 
According to Lei, the chassis will incorporate sixty-five new 
components developed to meet European safety standards, as 
well as additional enhancements resulting from safety 
reengineering currently underway in the United States. 
 
¶6. (SBU) Brilliance still hopes to bring its sedan line to 
the American market and has no plans to enter the low end of 
the market.  Mr. Lei explained that low margins and fierce 
competition simply make the low end unattractive.  He 
believes Brilliance's entry with a luxury-style low-priced 
sedan will reap big dividends. 
 
¶7. (SBU) Brilliance also hopes to be the first Chinese 
company to both sell and produce vehicles in the United 
States.  Lei explained that his company will likely begin by 
producing replacement parts in the United States and likewise 
investigating the possibility of acquiring a Mitsubishi-owned 
 
 
facility in the central United States to produce engines. 
 
WICKMAN