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Hitachi, Shanghai Highly to make starter motors

TOKYO, Oct 30 (Reuters) - Japan's Hitachi Ltd and Chinese compressor maker Shanghai Highly (Group) Co Ltd said on Thursday they would set up a joint venture in China to produce starter motors for automobiles.

Hitachi Highly Automotive Products (Shanghai) Ltd will be owned 67 percent by Hitachi, Japan's biggest industrial electronics maker, and 35 percent by Shanghai Highly, which makes compressors for refrigerators and air conditioners.

The venture, to be established in December in Shanghai with $21 million in capital, will start production in January 2005. The companies hope to cash in on growing demand among the world's auto makers for less costly Chinese-made parts, as well as on China's growing domestic market.

Hitachi and Shanghai Highly, which also set up an air-conditioner compressor joint venture 10 years ago, estimate their latest venture will generate around seven billion yen ($64.7 million) in 2006.

"We are combining the strengths of the two -- Hitachi's know-how in designing and manufacturing starter motors, and the low-cost mass production skills of Shanghai Highly," the companies said in a joint statement.

The venture will be Hitachi's fourth automotive-related facility in China. Hitachi's automotive business accounted for 4.6 percent of its consolidated sales of four trillion yen for the six months to September 30, a Hitachi spokesman said.

Shares of Hitachi, a sprawling conglomerate that makes everything from data storage systems to power plants, closed down 5.07 percent at 655 yen, a day after its upbeat half-year earnings results had boosted the stock by 7.64 percent.

Shanghai Highly's yuan-denominated A shares were down 0.26 percent at 7.97 yuan in afternoon trade. ($1=108.19 yen)