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Formosa Group's auto unit weak

Formosa Plastics Group (台塑 集團), the nation's largest industrial group, said yesterday that it may shut its automobile unit due to stalled sales and dwindling market share.

"If we continue doing things this way, we may well close it," said Wang Yung-ching (王永慶), the founder of the group, at its head office in Taipei yesterday.

"We want to do it thoroughly," Wang said, without further elabo-rating.

The group's carmaker, Formosa Automobile Corp (台塑汽車), was founded in 1998 and uses technology obtained from South Korea's Daewoo Group.

In a bid to downplay Wang's comments, Formosa Automobile said it would continue to develop the auto-assembling business while endeavoring to strengthen its technology in homemade component parts at the same time, said Jacky Yueh (樂嘉祺), Formosa Automobile's assistant vice president.

The company is looking for technology transfer from potential collaborators to advance its research and development skills in manufacturing component parts, Yueh said.

The company's vice president, Argus Lee (李宗昌), is currently in Europe looking for opportunities in technology cooperation, Yueh added.

The company is reportedly in talks with four European carmakers, including the sports carmaker Lotus, and will announce one or two collaborative projects by the end of this year, according to a report in a Chinese-language newspaper.

Formosa marketed 500 units of a small car, the Matiz, and 170 units of a sedan, the Magnus, last month, up from 420 units and 58 units in August, respectively, Yueh said. He declined, however, to provide annual sales targets for the company.

The company had 1.5 percent of the nation's car market in the first seven months of the year, according to Honda Wei, an analyst at local securities house KGI Securities Co.

Formosa Automobile can compete with other Taiwan carmakers such as China Motor Corp (中華汽車) "only if it can go to China and control key technologies," Wei said.

Local companies are subject to restrictions on investment in China based on net worth. In August, the 21st Century Business Herald in China reported Formosa Plastics Group was going start a US$1 billion car venture in the eastern port of Ningbo.

"Their car business fell short of their previous expectations," said Maureen Lee, who manages the US$80 million Jih Sun Fund for Taipei-based Jih Sun Securities Investment Trust Co (日盛 投信).

Given the small number of units, "there won't be any negative impact on the group" from the possible closure of Formosa Automobile, said Lee, whose fund has shares of Formosa Plastics Corp, the flagship of Formosa Plastics Group.
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