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.
95 Comments on “Chinese Automakers May Buy GM and Chrysler...”
Back to TopLeave a Reply
You must be logged in to post a comment.
You can also login using Facebook Connect.
Yeah, an update would be nice, as there’s absolutely no information as is.
Should GM have to file for Chapter 7, it would make sense for SAIC (GM’s partner in China) to buy much of what’s left of GM.
A C7 filing could be inevitable, because it would be hard for GM to operate under C11 with noone lending money…car production would come to a halt (no money for the suppliers) and hence C7.
This could also be one reason why GM is so reluctant to even think about C11…
Although I have to say that I haven’t heard anything of that sort, so unless there’s some concrete evidence, this has to be the wild ass rumor of the day…
Is this a trick to increase page views? A teaser to keep us from flipping the channel? I thought TTAC was above this, post the news when you have it please.
Why would you post this without details? This is equal to the local news saying “Five people die of ebola at local restaurant. News at 11.” and you are on your way out to eat.
How about a naked woman instead of an unsupported headline to capture readers.
Is this a trick to increase page views?
No, it’s legitimate. I presume that he could use a little time to write about it. Give the guy a break…
Perhaps he’s waiting for a ship to shore from one of TTAC’s spy subs somewhere out in the Pacific. Morse code and all.
I’m sure we’ll get the “late breaking” as it happens. This was just a head’s up. I would rather be aware of something happening than not, even if it’s only a headline.
I’ll check the wireless for any news.
This is really an OMG moment. Remember where you were when it was announced that…….????
Real story added while making (now completely irrelevant) comment.
Part of me shudders to think of GM becoming CM, part of me wonders if this is just a truly evil power play to bully Congress into bailout $$$.
It’s probably a teaser put out by GM itself, trying to play to the nationalist “we don’t want the damn chinese to buy up america so we better support failing businesses indefinitely.” If you remember the idiocy when the port operations were going to be sold to Abu Dabai or however and all the politicians got to give indignant speeches. If some company wants to buy GM and has the money, let ‘em at it.
Will they be buying “some assets” or entire companies?
If some company wants to buy GM and has the money, let ‘em at it.
Regardless of one’s political viewpoints, any American citizen must sadly acknowledge our downward trend towards 2nd rate economic status. We’re a debtor nation with waning political influence in the world. He who has the gold makes the rule. We’re out of the rulemaking business, and increasingly out of business altogether.
It breaks my heart.
They should definitely buy Buick and make it a China-only brand.
If nationalism defeats the chinese attempts to buy GM and chyrsler, will china retaliate and stop buying our federal debt? Inquiring minds want to know. Which would be worse? GM becoming CM or americans having to compete with DC for available funds to finance this orgy of defecit spending?
An “asset sale” can be nothing or all. Assets can be a hubcap stamping shop. Assets can be all plants, trademarks, patents etc. Usually, in this business, an “asset sale” is used to shield the buyer from long term liabilities – such as pensions or lawsuits. Check the history of airlines changing hands. It doubt though that SAIC could get away with screwing the pensioners as Delta did when they bought Pan Am …
br549, the ascendancy of finance that David Halberstam talked about in “The Reckoning” is over. The American car companies pretty much have to re-structure and their value – apart from their physical assets – without re-structuring is awfully low anyway. Technical people are getting out; you should see the number of Michigan plates in Silicon Valley these days. Unless the 2.8 do the radical work themselves (fat chance) it’s better that they are finished off this way than by bleeding to death.
Under SAIC ownership I suspect the technical work force will rush for the exits anyway. Whatever is in development would be mostly useless if that happened, once again leaving physical plant the only asset we’re talking about.
GM becoming CM or americans having to compete with DC for available funds to finance this orgy of defecit spending?
We are indeed in the midst of an orgiastic defecit free-for-all, but what is the alternative? Sell our souls to a nation we don’t even trust? We’ve already sold them our debt. Let’s hold on to manufacturing. Talk about Faustian bargains!!
The Rubin years proved that in better times, deficits can be eliminated, even when those deficits seem insurmountable. Economists know that in times of dire economic distress, deficit spending is a necessary evil. When the tsunami wanes, then we can get back to fiscal discipline.
Hey, the Belgians bought Budweiser. So this can happen, too.
I went to the Chinese web site and let google do some translating…I still didn’t find all that much information though. I could have ended up with the wrong article, or the google translater might be bad at reading between the lines. Anyway, the only related things I found were these:
[...]
“The U.S. auto industry is in an extremely difficult, this is the Chinese capital ‘hunters’ time for the U.S. auto manufacturing industry.” China Association of Automobile Manufacturers, said the experts, “Changfeng Motors has announced that bid to participate in General Motor’s Hummer brand precedent. ”
[...]
Jin Jian pointed out that from the general M & A in China or joint venture began supporting industries. The general also do not want to bankruptcy, to sell some assets in exchange for liquidity of its reality into account. China’s equipment manufacturing enterprises the ability to view, part of the acquisition of assets from the beginning, M & A joint-venture factory in China is the realistic option.
[...]
So to me, it seems like they’re interested in Hummer, as well as in the Chinese joint-ventures with GM…
Ostensibly, world domination is like a river. Given time a river turns into a canyon.
Matthew Danda:
Makes sense, both products are crap to begin with!
Because one is a democracy and the other is a ruthless dictatorship that more or less spits on the responsibilities it has under the WTO.
I’ve heard this rumor for months but the key word is ‘assets’. The Chinese government needs to find new and exciting ways to fund the effects of the one child policy and this may indeed be the way it gets done. GM may have assets both. Chrysler may actually be doable as a company. Although any sane entity would rather separate the wheat of assets from the chaff of debt.
Other than Toyota (which has never willfully invested in an automaker outside it’s own country), and Nissan/Renault (who would prefer to wait for a C11 filing), I really don’t see any other suitor other than a government that could actually get a substantial Chrysler and/or GM deal done.
I bet Rick Wagoner would make out like a bandit on this deal.
“Because one is a democracy and the other is a ruthless dictatorship that more or less spits on the responsibilities it has under the WTO.”
To be fair the US is second to none when it comes to flouting WTO rules and it’s treaty obligations generally.
It’s hard to see value for a Chinese firm in buying GM or Chrysler. Sure you could pick them up for a song there is a reason for that.
If you were a Chinese automaker entering the US market would you want to emulate the Japanese and build from the ground up or emulate Daimler?
There are millions in tax breaks on offer for new autoplants in the South and building a chain of dealerships shouldn’t be hard either.
Well, if they’d been allowed to, GM management would have moved all their manufacturing to China long ago, so why not have the Chinese pay for the brand?
@Tom: You have the wrong article. Never ever trust Google to translate anything Chinese. Even humans have huge problems translating Chinese into English. I’m blessed with bilingual people in my office. A good excerpt can be found here: http://www.gasgoo.com/auto-news/1008425/SAIC-Dongfeng-said-to-buy-GM-Chrysler-assets.html
If you were a Chinese automaker entering the US market would you want to emulate the Japanese and build from the ground up or emulate Daimler?
The problem is, that although the Chinese have money, they have yet to prove themselves in the auto business. The learning curve is so steep, they probably feel they don’t have the luxury of time as a still-emerging industrial economy.
Oh the irony the GM fans always spout the “where do the profits go” as an argument against those who prefer to purchase Hondas and Toyotas made right here in the USA by American workers. If China buys GM, will they still spout that line?
Also as to ruthless dictatorship, I’d say more like a South American style dictatorship. In the old days when my parents fled China it was a true Stalinist Marxist state. It didn’t matter what you did. What mattered was who you were. If you were a landowner , educated , or religious that made you an enemy of the people and state.
Now they are a traditional style dictatorship. Your actions are what count. You can make money, be religious do whatever you want except you can’t challenge the government in anything, kinda like the original Rollerball movie.
@Sherman: Oh, you can even challenge the government a bit now (within limits …) see:
http://www.bloomberg.com/apps/news?pid=20601109&sid=amFtFkI.V7nI&refer=home
It is fitting: blue Mao coveralls for all union workers. The mentality is already settled in.
Several Chevy cars, including the Corvette, have a color called Victory Red, no? If the Chinese do buy GM, that color name would take on a whole new meaning…
Wow GM and Chrysler bought by Commies. That’s something you never thought could happen or be allowed to happen.
If this is a real proposal then I suspect the Brand Name, current engineering and existing tooling would be worth the price of admission to the Chinese. The physical plant, real estate and labor force probably would not be part of the deal.
Rather than R&D clones of GM and Chrysler models popular in China it might be more efficient for the Chinese to pay a few billion USD to jump-start the process. If needed the tooling could be shipped from Detroit to China if it doesn’t already exist in sufficient quantity at GM locations in China. I am not sure that Chinese purchase of GM would need to be based on a large market for GM products in the US. At least early in the game the Chinese probably do not want to compete with already established Toyota, Honda, Nissan and Hyundai plants.
It gives me no pleasure that with globalization American labor is competing against a increasingly competent, hungry, energetic workforce throughout Asia. Protectionism has it’s own set of problems.
With either course the standard of living for blue collar and middle class workers in the USA will fall.
I personally lean towards some degree of protectionism (but not a bail out) for US based manufacturing (and I consider Asian transplants to be US based manufacturers) since it already exists in government and the professions. Globalization as currently practiced is crippled by worldwide residual nationalism and ethnic concerns. IMO the US practices a purer form of globalization than any other economy and it creates an uneven playing field which is hurting us.
@ Rday,
If China wanted to retaliate against a sale block, they have the Atomic bomb option of dumping the US currency they currently have. It would nuke the US economy, but that would seriously fuck with the world economy.
Look guys, I’ve been in this business since 1973. I’ve seen it all. I recall stereotypes against Japanese. Haughty managers ridiculed them. Now Toyota is #1. Likewise Korea. China is a much bigger powerhouse. I’ve seen the sell-out of the whole British car industry. Nothing surprises me anymore in this business, nothing at all.
If this is a ploy to garner more support for the bailout: it’s working! *chews nails*
Hey US government! Are you getting this? Other countries, like China recognize the value of manufacturing and help their manufacturing businesses compete in the global market. Kind of like the opposite of the USA.
JuniorMint :
If this is a ploy to garner more support for the bailout: it’s working! *chews nails*
I’ve already expressed my heartfelt opinion at the prospect, but another side of me says “bring it on.” Lob the proverbial ball into the Republican court and tell ole Shelby, Kyl, and the boys to pick their poison. If you don’t want a bailout, then here’s watcha got. No bluffs, just facts. Deal with it. You want a free-market global economy? Here’s what it looks like. See what the ‘Bama boys think of it.
LOL, there goes American built cars as we know them! Looks like I am goingto go out and buy me a classic 68 or 69 Camaro thats in great shape and stick with it for the rest of my life.
jess
http://www.privacy-center.ru.tc
Awesome. “Bail us out or well sell-out to the reds.”
I guess this doesn’t look that big to me.
GM has a market cap of 1.8bil-ish.
They have sucked nearly that from the US economy every month for a decade. The rate has to be higher now.
Point-GM is NOT AN ASSET FOR AMERICA!
It is a LIABILITY.
Let them have it.
Their market share will negligible in no time.
Zero leverage over our economy.
Crank the price up to see how nutty they are!
This could bring some bucks back.
Random thoughts.
Bunter
If Rick Wagoner had to choose between either a bailout (or ch 11) with no job or a Chinese owned GM with him as a front man, what do you think he would choose?
Sherman Lin-clever thought
Bunter
Wow – Bizzaro World…
The “All American” company that once helped the Nazis could now be owned by the Red Chinese.
I think I’ll just light a fatty and sit on the couch.
According to the Gasgoo article they’re interested in GM and Chrysler both.
I can picture it now, a remake of The Dukes Of Hazzard with a Chinese flag on the roof of the new “General Mao” !. :)
No more Road Runner but a Peking Duck, eh?
If GM’s cars are a generation behind the competitions’ and the only buyers are the ones that are either bargain hunting (incentives) or people that buy because they want an American car. Then how will a Chinese company ever make money from buying GM?
dilbert said:
“If GM’s cars are a generation behind the competitions’ and the only buyers are the ones that are either bargain hunting (incentives) or people that buy because they want an American car. Then how will a Chinese company ever make money from buying GM?”
You build the cars in plants with little environmental oversight and labor costs per day that GM has per quarter hour, that crapbox Cobalt that costs $16k would suddenly be $7,500 (OK, I made that up, but you get the point). The same mentality that gets people to buy junk at Wal Mart to save five bucks will take over the car business. “CM” will be the Hyundai of the 2010s, but watch out by 2020 when they get quality figured out.
If this is true, the Chinese are no dummies. What they did for the remnants of British Leyland (i.e., MG-Rover) they would do here, too.
SAIC (yes THAT company which has a 50/50 JV with GM and also one with VW) was trying to buy up MG-Rover, but strong MG-Rover along until the money ran out. THEN SAIC put in a bid, but being that the receiver of bankruptcy was not happy with the VERY obvious lack of good faith shown by SAIC, Nanjing Motors was awarded the bones of MG-Rover. The machinery, tools, dies, engine lines, rights (except the Rover name which was retained by Ford from a prior sell-off), designs and engineering drawings all where hoisted onto ships and went to CHINA. Nanjing paid pennies on the dollar for MG.
SAIC had a license to manufacture “Rover” cars but no right to use the name, so they bastardized a car up and called it “Roewe” (which is ironically pronouced “wrongway” in English).
So eventually, SAIC ended up buying Nanjing and now has all assembly lines, global rights to the MG name, everything – and have started exporting these cars.
I see a similar story here for SAIC, which is a partner of GM at this time, in China and in South Korea (GMDaewoo). SAIC also separately has invested in Ssangyong of South Korea, which was a prior licensee of Daimler-Benz! So there has been a lot of incest going on…
In any case, I can see SAIC waiting like a vulture, ready to swoop down and pick the bones of GM -OR- Chrysler. They won’t make the same mistake again and let a competitor get there ahead of them.
If they end up with both, well, that’s their problem! (”American Motors – SAIC LLC, anyone”?)
BTW, where did SAIC (appropriately named Shanghai Auto) learn this modus operandi? From GENERAL MOTORS which royally screwed over Daewoo by doing it to THEM in 2002 (or more to the point, their prior owners – the receivers and South Korean bankers).
I would look forward to see how the Chinese deal with the UAW.
LOL, the organized crime of the UAW against the Red Army, what a show.
Tie the millstone around the neck of the Chinese instead of the American taxpayer. Brilliant.