Frankfurt: Daimler AG said it’s open to work with its biggest shareholder, Chinese billionaire Li Shufu, signalling any cooperation might be largely confined to the world’s biggest car market.

Since Li’s arrival in February, Daimler has been negotiating a delicate balance between the wishes of its near-10 percent holder and the company’s existing partners in China, the most important market for Mercedes-Benz vehicles. At the same time, carmakers like Daimler are facing up to an intensifying trade spat between China and the US.

“In our future discussions of the automobile business in China, we will be able to include our largest shareholder," chief executive officer (CEO) Dieter Zetsche said on Thursday in a prepared speech at its shareholder meeting in Berlin. Daimler is “open to all possible options" so long as its longtime partner, BAIC Motor Corp., is on board, he said.

Li’s presence leaves Daimler in a tricky spot on technology sharing, while potentially complicating progress toward a corporate overhaul meant to address the shift to electric and self-driving cars. Zetsche has been boxed in further by the budding trade war, which led China to propose additional fees on American car imports that would hit Daimler sport utility vehicles being shipped in from its plant in Alabama.

“Without a doubt it’s an unusual situation for everyone involved," Hendrik Schmidt, a corporate governance analyst at asset management firm DWS Group GmbH, said in a speech, referring to a competitor becoming Daimler’s biggest holder.

Li, whose Zhejiang Geely Holdings Group Co. this month presented plans to start selling its Lynk & Co. brand in Europe, has flagged he sees partners and alliances as the key to defending the industry from new competitors. His holdings also include the largest stake in truckmaker Volvo AB, the Volvo Cars luxury brand and control of British sports-car maker Lotus Cars Ltd. Daimler already has two partners in China, BAIC and BYD Co. Ltd.

Daimler’s overhaul plans must ultimately help lift the company’s share price, Union Investment fund manager Ingo Speich said in a speech. “Heightened attention is order about any know-how transfer to China, because Geely could also be a wolf in sheep’s clothing."

German carmakers are increasingly finding themselves in the cross-hairs of worsening trade spats. US President Donald Trump, unhappy with European Union tariffs, has repeatedly singled out Mercedes and BMW vehicles roaming American streets in his criticism of Germany’s lopsided trade balance with the US.

In another round of escalation, potential tariffs announced by China Wednesday on American car imports in retaliation to US duties would have a bigger impact on Daimler and BMW than on Detroit automakers. Both German carmakers have significant production in the US.

BMW, from its plant in Spartanburg, South Carolina, and Daimler will ship just over 100,000 vehicles to China from the US this year, according to Evercore ISI estimates—almost $7 billion worth of goods, should imports get hit with an additional fee of 25%.

Daimler, posting annual record deliveries and earnings last year, is in a period of intense spending as the shift to electric vehicles takes shape. The automaker issued a muted forecast for profit growth this year, even as Mercedes sales continue to extend their lead over rival BMW AG. Responding to the shifts in the industry, Daimler last year announced plans to grant its individual units more independence, reviving speculation about a spinoff of its trucks division, the world’s biggest maker of commercial vehicles.

Granting its individual units more leeway to take their own decisions would make parent Daimler more agile and competitive, Zetsche said.

“It increases our clout and makes us even more attractive for investors and partners," Zetsche said. Bloomberg

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