First Rio-China deal after Hu detention

RIO Tinto has signed its first joint venture in China since the detention of Shanghai-based executive Stern Hu and three other employees in July.

The deal, done by Rio's small Alcan Engineered Automotive Solutions, is seen as a welcome sign, even though it is with a Taiwan-owned company and is not a pact Rio wants to stay part of for long.

Engineered Automotive Solutions, which Rio is trying to exit, has struck up a joint venture with Changchun Engley Automobile Parts to sell lightweight car products to factories in the northern and southern regions of China.

Changchun, in the northeastern province of Jilin, is one of China's major carmaking centres and Taiwan-owned Changchun Engley is based there.

A new company, known as Alcan Engley Automotive and majority owned by Alcan Automotive, will start supplying parts to factories later this year. The agreement would have required some form of government approval and is being treated as a welcome sign after tense relations between Rio and China.

Rio abandoned Chinalco's $US19.5 billion rescue package earlier this year in favour of a $US15.2bn rights issue and an iron ore joint venture with BHP Billiton. It then played hard in fraught iron ore price negotiations that ended with the detention of the four Rio iron ore employees.

Rio has been trying to sell its Alcan Engineered Products business since buying Alcan for $US38.1bn in 2007 but a dearth of buyers has forced it to look at selling off separate divisions, of which Engineered Automotive Solutions is one. The automotive division provides products to reduce the weight and improve the safety of cars.

"The Alcan Engley JV sees a strong demand for its products, which help its customers develop the next generation of greener, more fuel efficient cars in China and Asia," Rio said.

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