Shanghai Automotive Industry Corporation (Group) Business Report FY2006

Business Highlights

Reorganization
- Having received an official approval by China Securities Regulatory Commission (CSRC) in November 2006, SAIC (Group) reorganized its business structure. The Company transferred 11 complete car manufacturers, 3 engine and engine electronics parts makers, and 1 financing company to Shanghai Automotive Co., Ltd (SA), a Company's subsidiary listed on the stock  market,  at a cost of approximately 21.4 billion yuan. On the other hand, SA sold off to SAIC 15 subsidiaries including 12 auto parts suppliers, and issued new 3,275 million stocks through a third party allocation. As a result of the reorganization, SA, which had been focusing on auto parts production, became a comprehensive automotive enterprise encompassing vehicle manufacturers and suppliers of key components.


1. The following companies were transferred from Shanghai Automotive Co., Ltd. (SA) to the Company
- Federal -Mogul Shanghai Bearing Co., Ltd.
- Shanghai TRW Automotive Safety Systems Co., Ltd.
- Shanghai Sanden Behr Automotive Air Conditioning Co., Ltd.
- ZF Shanghai Steering Co., Ltd.
- Shanghai Koito Automotive Lamp Co., Ltd.
- Shanghai Automotive Brake Systems Co., Ltd.
- Shanghai Chisca Auto Suspension Components Co., Ltd.
- Shanghai Scherdel Spring Co., Ltd.
- Shanghai GKN Drive Shaft Co., Ltd.
- Shanghai Neturen Co., Ltd.
- Shanghai Automotive Co., Ltd.Powder Metallurgy Plant
- Shanghai Automotive Co., Ltd.China Spring Factory


2. The following companies  were transferred from the Company to Shanghai Automotive Co., Ltd. (SA)
Automakers

- Shanghai GM
- SAIC-GM-Wuling Automotive
- Shanghai GM Dong Yue Motors
- Shanghai GM (Shenyang) Norsom
- Shanghai VW
- Ssangyong Motor
- SAIC Motor Mfg.
- Shanghai Sunwin Bus
- Shanghai Pengpu Machine Building Plant
- SAIC-Volkswagen Sales Co., Ltd.
- Pan Asia Technical Automotive Center Co., Ltd. (PATAC)

Auto parts suppliers
- Zhong-Lian Automotive Electronics Co., Ltd.
- Shanghai VW Powertrain Co., Ltd.
- Shanghai GM Dongyue Automotive Powertrain Ltd.


<Highlights at joint venture companies>
Joint ventures with TRW

- In Feb., 2006, Shanghai TRW Automotive Safety Systems Co., Ltd. (STASS) launched the production of airbags and seatbelts for use in the new Focus built by Changnan Ford. STASS also started manufacturing TRW's newest BSA4.0 seatbelt systems for FAW-VW's new Audi B6 and Shanghai GM's vehicles in September the same year.

- In Sep., 2006, TRW of the U.S. announced that it will supply the BSA4.0 seat belt systems incorporating the newest Active Control Retractor (ACR) technology to the Chinese market from Shanghai TRW Automotive Safety Systems Co., Ltd (STASS). STASS already started producing the BSA4.0 seat belts for the FAW-VW new Passat B6 and Shanghai GM Buick Royaum assembled in China.

Joint venture with ZF
- In September 2006, ZF Transmission Shanghai Co., Ltd. officially became operational. The joint venture was established in 2004, with the ZF Group of Germany providing 51 percent and Shanghai Automotive providing 49 percent of the needed capital. ZF Transmission Shanghai will initially manufacture 50,000 sets of 5-speed transmissions annually. A new production line for 6-speed transmissions will soon be completed.


Joint venture with Koito Manufacturing
- In April, 2006, Shanghai Koito Automotive Lamp Co., Ltd. completed the construction of its third plant in the Northern Jiading Industrial Development Area of Shanghai and launched commercial production at this facility.
This headlamp plant will manufacture halogen head lamps for new car models to be released by leading carmakers such as GM, VW, and Toyota in 2007 or later. It will also produce HID headlamps.


Joint venture with Sanden
- In May, 2006, the Sanden Corporation announced that it will start manufacturing swash plate type variable capacity compressors for automotive air conditioners in China by transferring part of its production of external control compressors from its facility in France to its joint venture company - Shanghai Sanden Behr Automotive Air Conditioning Co., Ltd. Its annual production capacity in China is expected to reach 300,000 units. The aim of this move is to meet the needs of Volkswagen and other European automakersツ・plants in China to procure parts locally. The company also intends to step up its marketing efforts in order to win new businesses.


Joint venture with Sekely
- In April, 2006, the Company and Sekely Industries,Inc., jointly established Shanghai Sekely Automobile Modelling Technology Co., Ltd. to manufacture body panels mainly for Shanghai GM and SAIC Motor. Sekely Industries, Inc. is a U.S.-based manufacturer of dies used in body stamping lines,

Shanghai Stec Transportation Electric Co., Ltd.
- In February, 2006, Shanghai Stec Transportation Electric Co., Ltd. announced that its joint venture with Lear, Shanghai Lear STEC Automotive Parts Co., Ltd., had started delivery of remote control door lock transmitters for the new Buick LaCROSSE of Shanghai GM.
 
- In March 2006, Shanghai ArvenMeritor Automotive Parts Co., Ltd., was designated as the sunroof supplier of GM窶冱 Epsilon project in China and Korea. GM plans to use the Epsilon architecture in more than 10 new models including the new Buick and the new Chevrolet made by Shanghai GM. The development project will be carried out simultaneously in North America, Europe, and the Asia- Pacific region.

- Shanghai Stec Transportation Electric Co., Ltd. announced that its joint venture with Delphi, Shanghai Delphi Automotive Door System Co., Ltd., had obtained the business of door locks for the Shanghai GM Excelle. In September the same year, Shanghai Delphi Automotive Door System also won an OEM contract to supply door systems for use in two car models assembled by VW of Germany.