Chinese Automakers May Buy GM and Chrysler
Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. [A National Enquirer the paper is not. It is one of China’s leading business newspapers, with a daily readership over three million.] The paper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?
A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he’s in deep trouble.
At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world’s markets with accepted brands, and proven technology.
21st Century Business Herald, obviously with input from higher-up, writes that Chinese industry must change and upgrade. China wants their factories to change from low-value-added manufacturing to technically innovative and financially-sound high-value-add industries. Says the paper: “It would be much easier now for strong Chinese automakers to go global by acquiring some assets of their U.S. counterparts in times of crisis.”
Deloitte & Touche sees a trend: “Chinese automakers can start with buying out the OEM projects and Chinese ventures of some global carmakers such as GM and Chrysler.”
The Chinese appear to have bigger plans than an accounting firm can imagine. 21st Century Business Herald acts and writes as if its already a done deal, and the beginning of more to come. “In the coming two years China is likely to see a few of its large Chinese automakers and other manufacturing enterprises set a precedent for achieving globalization by acquiring global companies, just like SAIC or Dongfeng’s possible acquisition of troubled GM or Chrysler.”
Just in case you missed it, the Shanghai Automotive Industry Corporation (SAIC) is China’s largest auto manufacturer. In 1984, the company entered a joint venture with Volkswagen. A decade later, SAIC entered a joint venture with General Motors. In 2007, SAIC bought the Nanjing Automobile Corporation, which had acquired British MG Rover in 2005.
Dongfeng Motor Corporation is a public company, although 70 percent of their shares are reported to be in government hands. They also are one of China’s Big Three. The company has numerous joint venture partners, such as Nissan, Peugeot-Citroen, Honda, and Kia. Dongfeng (which means “East Wind”) was founded at the behest of Mao Zedong himself in 1968.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Will I be able to buy a Buick at Walmart? Aside from abject nationalism, is there any compelling reason to not let the Chinese buy GM/Chrysler? The USA needs to lower it's own debt so we do not have to rely on foreign investors buying our t-bills. If we can save tax dollars by not having to bailout both GM and Chrysler, doesn't this put us on a path toward a more solvent USA? We used to worry about the Japanese taking over car-making and the world. Did they? No. That Japanese bubble also burst, with a decade long recession after. And Toyota is not quite the rainmaker it used to be. Larger, sure. More profitable? No. Japan faces strong competition from China and Korea when it comes to the global automobile marketplace. Did anyone predict that this would be the case in the days of predicting Japan would own everything? Not that I'm aware of. Remember when the rumors were going around about India wanting a (large) piece of Detroit? We didn't seem as disgusted at that idea. But with Chinese ownership of GM/Chrysler we are about to vomit. Why? Is it communism?? China may not have free elections, but they espouse capitalism and free trade better than most countries. The thing about a communist dictatorship is that things can get done fast. Decisions can be made and implemented very quickly. Here in our democracy, government decisions come slow and take forever to implement. Committees, lobbies, parties, PACs, lawsuits, regulators, and the like that we have here in the USA keep the pace of government change slow as every side of the debate must be heard and considered. Not that I think communism trumps democracy. Carefully considered decisions are usually the wisest. It's our partisanship for the sake of partisanship politics that gets to me. We can't even fix up New Orleans or the World Trade Center in a timely fashion. If the The Shanghai World Financial Center was knocked down by Taiwanese terrorists, I'm sure the PRC would have a new one up right quick. The USA has been moving away from manufacturing for a very long time as it faces global manufacturing competition. It was inevitable that this trend would extend to car making. Frankly, I'm not sure Americans want to make anything anymore. Sure companies do, but American workers do not seem to want to work on assembly lines any more. Are you willing to drill holes in sheet metal all day long? Only if you get a big salary and pension a la the UAW, right? Let's face it, America's youth is way past lusting over a factory jobs; they all want to work for the next Google. As well they should. We are the most advanced country and society in the world, why the hell should we be doing the grunt work? If we ever lose our taste for innovation and entrepreneurship then we will have serious problems. We Americans, like our companies, need to get in shape. We need to be more efficient and do things smarter. There was a day when a high-school education (or less) was enough to get you a good manufacturing job that was a ticket to the middle class. Those days are long gone in America, and in perhaps the world. A college education is mandatory it obtain any sort of good paying job in the USA. It's been that way for a while and is not going to change. Unskilled labor cannot provide middle class comforts. Even the immigrants in the USA from Mexico and Central and South America know this. So I say letting China or Chinese companies own GM and/or Chrysler is something to seriously consider. Patriotism and nationalism should not cloud our judgment here. "Who's gonna make our planes and tanks if there's another war," you ask? General Dynamics, not General Motors. Do you think GM can really roll out an M1A1 tank? GM can't even make a car as good as an Accord, they ain't gonna be making F-22's anytime soon. Lockheed Martin/Boeing has us covered there.
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