American Axle & Manufacturing (AAM) has prepared a remedy package to submit to China’s merger regulator regarding its proposed acquisition of UK-based peer Dowlais, according to two sources familiar with the matter.

Remedies for the USD 1.44bn cash and stock transaction may already have been proposed to the State Administration for Market Regulation (SAMR), the first source said. The deal parties are likely to enter back and forth remedy discussions with SAMR soon, according to the first source.

The process of remedy talks and the outcome of SAMR’s review of the deal will be impacted by the evolving trade relations between China and the US, said the two sources and a third source familiar with the Chinese auto industry.

Even if the Sino-US relations have warmed somewhat following the trade and economic deal reached by their top leaders during the recent Asia-Pacific Economic Cooperation Summit, the deal will still need remedies to achieve approval from SAMR, the first and the second source said.

Possible remedies

According to the third source, in late October, a stakeholder who is critical of the deal received confirmation that AAM plans to retain GKN’s China strategy. For example, the Dowlais’ joint venture (JV) in China, the Shanghai GKN Huayu Driveline Systems (SDS), will continue to focus on its China expansion. For the time being, it appears that nothing will change for the SDS post the AAM/Dowlais deal, the third source said.

It is unclear whether this is part of the proposed remedies, the third source said.

SDS is a JV between GKN Automotive of Dowlais and Huayu Automotive Systems Company (HASCO). SAIC Motor Corporation holds a majority stake in HASCO.

According to an analysis by this news service, SDS is a key asset of Dowlais in China—a ‘trusted partner for 80% of Chinese OEMs,’ according to the company’s website.

SDS has an approximately 40% share of China’s constant velocity (CV) driveshaft market, ranking first nationwide in the suppliers of the product in China, according to SDS’s website.

On 24 October, in response to a question raised by this news service on the Shanghai Stock Exchange’s investor interactive board, a company representative at HASCO said that the Dowlais/AAM deal will not have a substantial impact on its business.

No apparent obstcles

Relevant third parties in China’s automobile industry have yet to hear anything problematic about the deal during SAMR’s review, the third source said.

“SAMR has been engaging with us regarding the deal in its review,” said a fourth source close to a Chinese trade association of the auto industry. The fourth source declined to disclose any details of the feedback from the members of the association. The first source said Chinese associations did not appear to have major concerns.

As reported by this news service, SAMR kicked off rounds of RFI procedures with the deal parties around mid-September. Some third parties have been working on the RFI response even earlier, the report said. At least two automobile companies, other than trade associations, were directly engaging with SAMR’s RFI process around the same time, the second source added.

One automobile sector player involved in SAMR’s comment-seeking procedure told this news service the company’s concern was not strong, the fourth source added.

SAMR has delivered its concerns regarding the deal to AAM and Dowlais a while ago, the first source said.

The competition concerns might have arisen simply from high market shares of some products and can be resolved straightforwardly by behavioural remedies, according to an uninvolved lawyer in the auto sector.

The European Commission (EC) has unconditionally cleared the deal, as both companies announced.

Antitrust approvals that remain outstanding include Brazil, Mexico and China, the announcement said. The deal has received final unconditional approval from Brazil’s competition authority, CADE, according to the latest update by the regulator on 6 November.

In China, the parties are actively engaging with SAMR and remain highly confident of obtaining antitrust clearance for the Combination from the SAMR, with clearance expected in late 2025 or early 2026, the announcement said.

The deal’s extendable long stop date is  29 June 2026.

American Axle and Dowlais did not respond to requests for comment.

SAMR does not comment on ongoing deals.