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Mitsubishi Motors, already lagging other foreign automakers in China, is unlikely to accept an opportunity to increase its stake in one of its two main joint ventures in the country because it wants to preserve cash, a source told the Wall Street Journal.

Guangzhou Automobile Group, the controlling shareholder in the joint venture, recently approached Mitsubishi with the opportunity to increase its stake in the venture to 32.79% from its current 14.59%, two sources told the paper.

The additional stake would be sold to Mitsubishi by another Chinese partner in the venture, Changfeng Group, the sources said. The increase would give Mitsubishi an equal share in the venture, called Changfeng Motor, to that of Guangzhou Auto, giving Mitsubishi more say in the venture’s activities and a larger share of its returns.

But one source said Mitsubishi wass unlikely to respond to the offer. While it has substantial funds, Mitsubishi is reluctant to deploy it given continued global uncertainty, the source said.

“It’s not that Mitsubishi doesn’t have the cash to respond, but since the global financial crisis, the company has been preserving cash for rainy days,” the source told the Journal. Mitsubishi is being “highly selective” about using its cash, and “at this point, it’s not going to accept Guangzhou Auto’s proposal.”

Mitsubishi sold 41,739 vehicles in China last year through its two joint ventures and through imports from Japan, almost unchanged from 2008, according to J.D. Power & Associates. Toyota sold 700,900 vehicles there last year, up 21% from the previous year, and other major carmakers grew even faster.

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By GlobalData

Mitsubishi has two vehicle-manufacturing partners in China: Changfeng Motor, based in the central city of Changsha, and South East Motor, based in the southeastern province of Fujian. Mitsubishi owns 25% of South East Motor. Both ventures are relatively small players and, because of its small stakes in them, Mitsubishi has not been able to control how they run their plants or sales operations.

Jun Hiraoka, head of Mitsubishi’s representative office in Beijing, told the Wall Street Journal he had no knowledge of an offer by Guangzhou Auto to let the company increase its stake in Changfeng. Guangzhou Auto declined to comment and a Changfeng Motor spokesman couldn’t be reached.

One source told the Journal Mitsubishi ideally would like to dissolve its current ties with Changfeng Motor and South East Motor and “start anew” in China, building more equal relationships with local partners as rivals like General Motors and Toyota have done.

However, the source said that was unlikely, and that instead Mitsubishi might search for ways to enhance the South East Motor joint venture, making it the main pillar of the Japanese company’s China market strategy.

Guangzhou Auto President Zeng Qinghong said this week that cooperation between his company and Mitsubishi in Changfeng Motor was going well. “We believe that if we work hard together with Mitsubishi, it should be a win-win partnership,” he was quoted as saying. “We welcome them to increase their stake.”

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