MSM Smells Coffee, Insists: "Sell It To The Indians."
Duh. After a month of increasing indications that mostly Chinese concerns may be interested in snapping up pieces of the D2.8, the MSM is cautiously warming up to the facts of life. It’s happening everywhere. Except at the stalwart Detroit News, which sticks to it’s “see no evil, hear no evil, write no evil” editorial policy, and where a search for “SAIC” produces “GM to offer OnStar service in China.” Good luck with that.
“Now, Americans will be introduced to car companies like Tata from India and SAIC Motor Corp. and Guangzhou Automobile Group Co. from China,” writes Robert Rector for the Pasadena Star-News. “Undoubtedly, they will likely follow the Japanese model and build factories in the United States because of the cost of transporting fleets of automobiles across the Pacific.” Points for not giving up the hope. But wrong, Mr. Rector. First, Tata is most likely out of the game for a while, for reasons we shall see further below. Second, the cost of transporting fleets of automobiles across the high seas is minor compared to the price of the car. Especially now where ships are sailing half empty. Factories are built when exchange and labor rates are unfavorable. The Chinese will most likely keep as much as possible in China. Even Motor Trend wakes up:
“As government funding slowly regresses from the Detroit Three’s grasp, their struggle to unload underperforming brands has become evermore frantic. General Motors, struggling to survive into the New Year, carries the most brands under its far reaching umbrella. According to reports on Gasgoo.com citing the China Review, officials at the General are looking to its partner SAIC in China to scoop up the young Saturn brand for an undisclosed price.”
Also wrong. Gasgoo had it from the “China Automotive Review” not from the “China Review.” Completely different animals, but for Motor Trend, all Chinese likely look alike. Motor Trend is likewise clinging to the hope that someone else than the dreaded Chinese may take on the soon to be orphaned brand: “Speculated to also be thrown into the mix of interested parties is India’s steadily expanding Tata Motors.” Motor Trend clearly hasn’t kept up with the latest trends in Asia. Now, what about Tata?
Tata has been busy with its own series of troubles lately. “Few companies in India have been more rattled by the global financial crisis than Tata,” wrote London’s Times yesterday. Mumbai’s Taj Mahal Hotel, which had been stormed last month by Islamist militants, and forcefully retaken by Indian special forces, is part of the Tata Group conglomerate.
Tata’s fortunes are based on steel, and steel is definitely not the place to be these days. Their overhyped Nano is still without a factory. Buying Jaguar? Bad move when conspicuous consumption has lost its cachet. Buying Land Rover? Bad move when SUVs are heading to the Museum of Natural History, dinosaur section. India’s Economic Times has a long article on Tata’s string of bad luck, and even an astrologer the paper interviewed sees Tata’s stars in serious mis-alignment. Yesterday, Tata’s bonds were been demoted to a less than junk bond rating. S&P changed them from BB+ to BB-, reports the Economic Times. S&P cited the usual suspects: “We’ve downgraded Tata Motors and placed the rating on credit watch due to the faster-than-expected deterioration in the automobile market conditions.” Credit watch is S&P speak for possible further downgrades.
Next stop would be the C category, that’s where GM sits. A company with BB- has a very hard time (as in abandon all hope) of finding cash. Tata has been busy selling companies to raise cash, they don’t look like a buyer at all. But a MSM that appears to be on Valium can’t be bothered by such trifling matters. Best to stick with TTAC. Just sayin’…
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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Since GM taught their partners at SAIC how to go about stealing a car company for pennies on the dollar, (see GM's business dealings when buying Daewoo), and SAIC obviously learned very well how to go about doing same (see SAIC's dealings when buying Rover), it seems crystal clear to me how this is going to play out. SAIC will string GM along, ensure they know they are interested, make it impossible for GM to try to find another buyer, continue to string them along, continue to string them along, etc etc ad nauseum, then after GM takes a dirt nap, SAIC will swoop in and snag the properties they want for 1/4th or less of what they'd been "intending" to pay GM. Yeah I know, I'm a cynic. (Know what I say? If you aren't a cynic by age 25, you haven't been paying attention).
@menno: That's more like it. The Chinese are masters of the deal. Especially when the other side is in a hurry. Stringing along they don't need to be taught. It's the first thing you learn in China if you are willing to pay attention instead of paying too much: Never show you are an eager buyer or seller if you want a good price.