Why The Chinese Aren't Coming
Automotive News China [sub] managing editor Yang Jian has a column warning Chinese firms not attempt to buy Volvo anytime soon. Yang considers the Shanghai Automotive Industry Works (SAIC) and First Auto Works (FAW) as the most likely suitors for Ford's Swedish division. They alone have access to the state-controlled bank financing needed to make the deal happen. Never mind that, Yang says, there are a wealth of lessons that China is still not ready to buy-up western car brands. The first-ever Chinese purchase of a western brand, Nanjing Auto Group's takeover of MG, led to an overleveraged NAG being bought up by SAIC. When SAIC bought Korean firm Ssangyong, it had to endure labor walkouts over plans to shift production from Korea to China, followed by a slide into unprofitability. As a friend of Yang's at SAIC puts it "SAIC certainly won't consider buying (Volvo) since we know how much hassle an overseas acquisition could create." So it turns out that a booming market isn't enough for Chinese firms to overcome their unfree-market disadvantages.