Mitsubishi Motors is set to take a stake in severely troubled Beijing Jeep, the joint venture between DaimlerChrysler and Beijing Automotive, after signing a letter of understanding, Agence France-Presse reported, citing state press on Tuesday.

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“Mitsubishi will become a new shareholder… and this will usher our cooperation onto a new stage,” said the Business Weekly, citing Tong Zhiyuan, executive vice-president of Beijing Jeep, according to the AFP report.

Financial details of the stake were not discolosed.

DaimlerChrysler currently owns 42.4% of Bejing Jeep, with China’s Beiijng Automotive holding a 57.6% stake.

The debt-laden Sino-foreign venture that produces sports utility vehicles (SUVs) has been cooperating with Mitsubishi under a licensing agreement reached last June, recently launching two versions of Mitsubishi’s Pajero Sport model. Beijing Jeep will also produce Mitsubishi’s Outlander model next year.

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“Mitsubishi’s bolder engagement will bring about new products and advanced management know-how, and will help us a lot in turning (the company) around,” Tong said.

Beijing Jeep earlier predicted it would sell about 20,000 SUVs this year, up from 10,000 units a year ago.

DaimlerChrysler’s debt-laden Sino-foreign venture said those sales should translate to earnings of more than 100 million yuan ($US12 million) by 2004, according to recent reports cited by AFP.

To combat declining sales of its dated models amid greater competition in China’s SUV market, the company will put out at least one new model a year.

China’s SUV market is forecast to reach 120,000 units this year, up from around 95,000 last year, Agence France-Presse noted.