By on April 20, 2009

Daimler’s Zetsche won’t have to worry explaining the T&E for his trip to the Shanghai Motor Show. He might come back with a big chunk of Chinese money. According to the German Handelsblatt, “Daimler is negotiating with the Chinese sovereign wealth fund about selling shares and doesn’t rule out a Chinese engagement in Stuttgart.” Zetsche put on his best poker face: “We have had talks in the past  with possible investors in China, and the talks are still on-going.” Looks like there is more to it: On Tuesday, Zetsche will travel to Beijing to meet with representatives of the Chinese government. Asked whether he would also meet representatives of the Chinese government fund CIC, Zetsche gave a definitive “no comment.” If they buy, China will be in good company:

Daimler’s cars are not just the conveyance of choice of leaders of state, governments also think that Daimler is a good investment. The government fund IPIC of Abu Dhabi just dropped €1.95 billion on Daimler and received 9.1 percent of their shares in return. Kuwait already owns 7.6 percent in Daimler and has been rumored to possibly want more.

A few days ago, China Daily reported that “China’s $200 billion sovereign fund will consider investing in Europe in 2009, after avoiding the continent last year because of trade barriers.”

“Europe has started to welcome investments” without attaching conditions, China Investment Corp’s Chairman Lou Jiwei said Saturday at the Boao Forum on southern China’s Hainan island.

Beijing-based CIC, whose investments have included stakes in Blackstone Group LP and Morgan Stanley, didn’t invest “a single cent” in European companies or assets last year, because the continent had put up barriers to limit the activities of sovereign wealth funds, he said.

The agency was founded to provide better returns for China’s foreign-currency reserves, the world’s largest at $1.95 trillion. The fund last year earned $10 billion from its investments, representing a 5 percent return, Radio Television Hong Kong reported on February 24, citing a source it didn’t identify.

“There was rising protectionism against China last year, and the European Union had the worst limits,” Lou said. “They allowed us to invest in no more than 10 percent of a company’s stakes and required us to give up our voting power” in management, he said.

“We couldn’t accept that because investments should be based on market practices,” Lou Jiwei said. “With the removal of these conditions, we will seriously consider making decisive and prudent investments overseas this year, including in Europe.”

Daimler is no stranger to Beijing. Their BeijingBenz-DaimlerChrysler Automotive joint venture cranks out made-in-China C- and E-Class models. China is dying to get a long version of the E-Class so that the boss can stretch his legs in the back, but Zetsche didn’t want to give a date for the launch of the roomier Beijing Benz. Longer versions of the Audi A4, of the Passat, and even of the venerable Santana are all the rage in the Middle Kingdom. Instead of giving the Chinese a chance to stretch their legs, Zetsche will give them the cramps: Daimler’s [S]mart will come to China.

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9 Comments on “Beijing Hearts Benz: China Might Buy A Chunk Of Daimler...”

  • avatar

    Look for the Chinese to buy anything tangible with the $1.95 trillion in an effort to off-load it onto the next ‘greater fool’.

    Getting rid of dollars is smart. Look at what is coming down the pike (i.e. inflation):

    Turn the graph upside down to realize the ACTUAL VALUE of the dollars in everyone’s pocket/bank account/foreign currency reserves.

    Once the rest of the countries catch on to what China is doing, they’ll join in and start bidding up the prices of tangibles.

    Watch Gold, Silver, Paladium, Platinum, Rhodium and – Copper.

  • avatar

    Sorry, I can’t edit and I forgot to add the link:

  • avatar

    Menno, your monetary observations are spot-on. While I’m not sure the Beck graph gives adequate weight to economic growth which soaked up quite a bit of the money growth from the mid 80s to the mid 00s, it is undeniable that the supply of dollars is being seriously juiced right now. The bad part is that governments have an abysmal record of knowing when to get off the money accellerator pedal, because by the time the economy starts to show the effects, it is too late. The WSJ reports today that the monetary braniacs are aiming at 2% long term inflation. It will be way, way over that before they know it. Lock in those mortgage rates, everybody and wait for asia to own a lot more than part of Daimler Benz before this is over.

  • avatar

    Am I going mad or are Daimler trying to sell the us the idea that the Chinese buying into Daimler is a good thing? Does this sound like a healthy company? Going around the globe asking for money?

    As for economic doom and gloom, the fall of GM and Chrysler will kick start a period of major recession in the US. Jobs lost from their collapse and supplier fallout will be the starting point. In the UK, 2009 is going to be a lost year with recovery forecasted for 2010. Europe aren’t faring much better. The US is going to lose a big chunk of its manufacturing industry, have a devalued currency and be in debt to many people (China, Japan and the UK, being the biggest).

    Strap yourselves in people, the party has just begun…..

  • avatar

    Does this sound like a healthy company? Going around the globe asking for money?

    It sounds like a company that’s ready to expand or else go on a shopping trip.

    Daimler’s cash position is pretty good. It doesn’t need cash to support current operations. My guess is that Daimler wants cash so that it can spread it around.

    Daimler has the same problem now that it had prior to buying Chrysler — it needs to get bigger, or else risk being gobbled up by somebody else. To prevent that, they need to either cloud their balance sheet (the poison pill approach) or else become too big to acquire. Buying more businesses would put them into the latter camp. Perhaps they will take another run at acquiring another company or else diversify away from automotive.

  • avatar

    “Daimler is negotiating with the Chinese sovereign wealth fund”

    Will the Chinese government destroy the other auto companies to get a better ROI? It is really a bad idea to have a legal mafia “investing” in the productive economy…If you are a consumer.

    “Europe has started to welcome investments” without attaching conditions, China Investment Corp’s Chairman Lou Jiwei”

    Imagine this coming from the mouth of a “Communist” chinese…LOL!

  • avatar

    lol….almost every big investment that sovereign wealth/public pension funds have made lately has turned into a dud.

    Singapore w/ Merrill
    CALPers w/ SoCal residential real estate
    Dubai w/ AMD & CityCentre Las Vegas
    Ontario Teachers Fund w/Bell Canada and emerging market investments,

    etc. etc. etc.

    basically it sounds like the boys at Stuttgart are not optimistic about future lux. car demand…..on the other hand….

    the boys at Stuttgart are afraid of losing more ground to Audi….so the easiest way to guarantee success in China is to have the umpire/scorekeeper/groundskeeper (e.g. the Chinese gov’t) as a shareholder.

  • avatar

    Somehow I don’t find this any more peculiar than the pop-up banner ads on TTAC for “Asian Girls for Love & Marriage.”

  • avatar

    “Perhaps they will take another run at acquiring another company or else diversify away from automotive.”

    Oh great. Now Daimler can rape and pillage another company. I hope the Chinese just buy them.

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