Daimler AG, the world's biggest truck maker, and Beiqi Foton Motor Co will sign a preliminary agreement to form a commercial-vehicle venture in China within two weeks as the country's trade growth spurs truck demand.

The venture, based in Beijing, will make Mercedes-Benz trucks, Foton vehicles and Mercedes-Benz engines, a Foton official said Monday. The deal will be signed before the Olympics start on August 8, the official said.

Daimler and Foton, China's biggest commercial-vehicle maker, have spent four years seeking a partnership, with earlier plans for an equity tie-up derailed by Daimler's sale of Chrysler LLC, Bloomberg News reported. The German auto maker, like General Motors Corp and Toyota Motor Corp, wants to boost sales in China to offset slumping demand in the United States and Europe.

"It's great news for both companies," said Yale Zhang, director of CSM Asia in Shanghai. "Daimler can finally make Benz trucks in China and Beiqi Foton will benefit from learning advanced technologies."

China's economy surged more than 10 percent in each of the first two quarters, spurring demand for vehicles to haul goods and construction materials. Truck sales rose 19.3 percent in the first half, outpacing the 18.5 percent increase in overall vehicle sales.

Daimler's expansion in China contrasts with its operations in North America, where it's scaling back production following a 37 percent decline in truck sales last year. The Stuttgart-based company will fire almost half the workforce at a plant in Ontario, it said on July 17.

"We are eager to move forward as soon as possible," said Trevor Hale, a Beijing-based spokesman for Daimler. He declined to comment on the timing.

Beiqi Foton boosted profit sevenfold last year to 388 million yuan (57 million U.S. dollars) after selling more Auman and Ollin trucks. The Beijing-based company aims to more than double annual vehicle sales to as many as 1 million by 2010 from about 400,000 last year.

The truck maker closed unchanged at 7.42 yuan in Shanghai trading on Monday. The company has dropped 43 percent so far this year.

Foton scrapped plans to sell a 24 percent stake to Daimler in December after its stock almost tripled during a yearlong approval process. The company instead raised 1.04 billion yuan selling shares to domestic investors earlier this month.

Daimler also has a venture with Foton's parent, Beijing Automotive Industry Holdings Corp, which makes Mercedes-Benz sedans in the Chinese capital.

(Shanghai Daily July 30, 2008)