China's #3 Dongfeng Hungry for GM
As reported by TTAC weeks ago, Chinese auto makers are seriously looking into buying all or some of General Motors. The story was never officially denied in China. Now, there are fresh and more concrete indications about a possible Chinese move on GM. Hu Xindong, Secretary to the Chairman of China’s third largest auto maker Dongfeng, said they have been contacted by financial groups which have close relationships with GM. Topic of the discussions: A possible takeover. This according to China’s National Business Daily via Gasgoo. His company “has not started formal discussions yet,” said Dongfeng’s Hu. He also said that “for the moment,” Dongfeng Motor has no intent to take over GM as a whole. They are interested in buying “overseas assets.” In China, “overseas” usually means outside of China. Hu: “Our managing board has not officially considered the option yet.” In China, where one never gets a clear yes or no, these statements are tantamount to a “Hell yes! We are crunching numbers day and night!” When Dongfeng was floated weeks ago, eyebrows went up. Wouldn’t SAIC, GM’s longtime Chinese partner, be a better fit? So, where did SAIC go?
Meanwhile, Shanghai Automotive Industry Corp (SAIC) has concluded their own negotiations, and officially said they are not considering buying GM. That because of “GM’s huge costs of compensating workers and other follow-up expenditures,” as Wang Liusheng, an auto analyst at China Merchants Securities did put it.
Subtext: Taking over GM nuts and all would have been nuts in Chinese eyes. The Chinese are interested in the assets, but they balk at the liabilities, especially the ones with a UAW attached. Any other outside investor who owns some sanity would look at it the same way.
SAIC dropped it, and the ball appears to be in Dongfeng’s possession now. Considering the – by Chinese standards – unusual candidness of Dongfeng, they are seriously kicking it around and are discussing the play with investment bankers and Dongfeng’s government backers. Then again, given that GM is heading to DC, it could be the China card that is being played. But then again, it’s Donfeng that is putting at least some cards on the table.
There’s the political angle: SAIC is very close to the Shanghai regional government, which is often at odds with China’s central government in Beijing. Dongfeng at the other hand is a central government creation. Dongfeng was founded at the behest of Chairman Mao Zedong in 1968, and 70 percent of their shares are said to be owned by China’s central government. If the goverments are getting involved, they might as well get involved.
Here some background about Dongfeng’s joint ventures. Sourced from Wikipedia, usually a reliable source in this very inexact science:
Dongfeng Motor Group Company is the listed company of Dongfeng Motor Corporation.
Dongfeng Peugeot-Citroën Automobile, a JV with the PSA Group. Produces the Citroën ZX, Xsara, Picasso, and Elysée, and Peugeot 307
Dongfeng Motor Company, a JV with Nissan. Produces the Nissan Sunny, Bluebird, Teana, and Tiida
Dongfeng Honda Automobile Company, a JV with Honda. Produces the Honda CRV
Dongfeng Nissan-Diesel Company, a JV with Nissan Diesel. Produces heavy trucks.
Dongfeng Yueda Kia Automobile Company. Has a 25% share with Kia and Yueda to produce the Hyundai Accent, Kia Optima, and Kia Carnival/Cerato
Dongfeng Liuzhou Motor Company. Wholly owned subsidiary which produces the Dongfeng Future minivan.
Honda Automobile (China) Company. Dongfeng owns 10% of Honda’s importer to China.
Dongfeng Automobile Company Limited. A JV with Cummins to produce Diesel trucks and engines.
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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@Bertel Schmitt : I've never actually lived in China (or a certain disputed territory where my folks are from), nor worked in/with Chinese businesses. But yes, the lack of truth in an official denial is universal.
Paul: In the trade, market saturation begins at 500 per 1000 pop. You learn that on the first day of car marketing school. Take still piss-poor Poland. It had 138 cars per 1,000 population in 1990. It had 351 per 1,000 population in 2006. It's currently the only growth market in Europe, growth about 30%. It will start slowing down at 500. To sell cars you need people with some money, old enough to drive, who have no cars. A no-brainer. Often overlooked, as many no-brainers are.