Editorial: Where's The Yellow Peril?

Bertel Schmitt
by Bertel Schmitt
editorial where s the yellow peril

A year ago, the 21st Century Business Herald reported that SAIC might buy GM and Dongfeng might buy Chrysler . TTAC was the first to break the story in the USA. As a result, our servers melted down, and we were accused of driving down GM’s and Chrysler’s stock price. Usually, buyout rumors drive prices up. But GM and Chrysler had only one way to go: Down. Months later, GM and Chrysler went bankrupt. They became a ward of the US government. Chrysler was given away to Fiat. GM was trimmed down to the barest minimum and is still owned by the US government. And the China story turned out to be a myth.

Following this, stories of Chinese car companies buying US car companies became a regular staple. Up to now, it is mostly talk and little action.

Several Chinese companies were rumored to be buying Ford’s Volvo. Geely was rumored for a long time to be a serious suitor for the Swedish brand. Things became quiet regarding Geely and Volvo recently, so quiet, that an American group known as the Crown consortium, led by Ford director Michael Dingman and former Ford and Chrysler executive Shamel Rushwin, were reported to be making a play for the Swedish marque., for less that the $2.5b Geely was supposedly ready to pay. According to the Wall Street Journal, SAIC was also interested in buying Volvo. Nothing materialized.

Whenever a Western car company was up for sale, a Chinese car company was supposedly interested. BAIC was reported to be a contender for Opel. BAIC’s offer was supposedly the best of all offers made for Opel. But nothing ever came of it. (BAIC and other Chinese companies may still have a chance to bid for Opel. The deal with Magna hasn’t been signed yet, is delayed again and again. Now, the EU Commission is making noises that the bidding process should be re-opened.)

Saab was rumored to be coveted by Geely and Dongfeng. Nothing materialized. Saab was finally bought by a small boutique car company in Sweden, Koenigsegg. Finally, a Chinese company came close to the deal: BAIC signed a letter of intent to become a non-controlling minority shareholder in the Koenigsegg-Saab venture. Even that deal is not closed yet. The European Investment Bank will decide next week on a €400m ($598m) loan request from Saab that is key to the transaction. Sweden’s government must agree to guarantee the credit, and the European Commission must also rule that the loan doesn’t hinder competition by constituting improper state support. The EU Commission is very critical of government support, see the story above about Opel. TTAC’s man in Sweden says, the Saab-Koenigsegg-BAIC deal may be slipping away.

What’s left? Ah, yes, the old standby, Tengzhong and Hummer. Not necessarily an earthshaking deal as far as car companies go. Even that deal is not closed yet. In the beginning, China was up in arms about a Chinese company owning the manufacturer of a gas-guzzling gubernator-mobile. Slowly, they warmed up to the idea, and even its sharpest critics now recommend that the deal should be approved. The trouble is, China’s commerce ministry has not yet received an application. “We know no details about Tengzhong’s overseas purchase agreement,” said a ministry spokesman last week. No application, no approval.

Does the only real buying of foreign automotive assets by Chinese car companies come down to the purchase of a down-and-out British delivery van company, that hasn’t built any delivery vans for 10 months? Come to think of it, LDV doesn’t go to a car company, but an engineering firm, Eco Concepts. Supposedly with the backing of SAIC. Supposedly.

Why so much talk and so little action? Instead of invading foreign markets, the Chinese withdraw. China’s FAW just shelved plans to build a factory in Mexcio. Those damn Mexicans require any company with plans to sell its vehicles in the country to invest at least U.S. $100m in a plant to produce at least 50,000 units annually. FAW thought that’s way too ambitious, packed up, and left.

There are people who claim that the alleged bids are big PR maneuvers, aimed to get the names of Chinese car companies into the press. If that’s true, then it was successful. But somehow, I doubt that the Chinese, obsessed with saving face, have yet progressed to the “any news is good news” stage.

Others say, these rumors are the product of investment bankers who want to drum up interest for distressed car assets. There may be some truth in that. A Chinese suitor helps in shaking loose some government credits to keep the jobs at home and to save the intellectual property of cars nobody wants from moving to China.

Then there are others, yours truly included, that say that Chinese car companies better get with the program and start seriously buying while prices are low and sellers are getting increasingly desperate.

China has a booming car market, the biggest of the world. China will sell more than twelve million vehicles this year – at home. China’s car exports on the other hand, of which the world is dead afraid, are a joke: China exported a trifling 190,000 vehicles in the first seven months of this year, down 58 percent from 2008. Adding insult to ingrained rivalry, India out-exported China in the first half of 2009.

Let’s face it: The world isn’t necessarily clamoring to buy Chinese branded cars. Even in China, foreign brands such as Volkswagen or Buick are much more popular than homegrowns. Building a new car brand takes time and money, building a car brand in the saturated markets of the West takes a lot of time and a lot of money. Just ask Toyota or Hyundai how long it took them to gain respect and market share abroad. Buying an already established western brand while it is cheap or practically given away is a much more cost-efficient, time-saving, and politically expedient approach.

The other alternative is for the Chinese to focus on the two growth markets, namely China at home and possibly neighboring India. There is a lot to be said for this strategy. After all, these markets are growing, while the Western markets are saturated and contracting. Why should China focus on Europe or America in a time when China buys nearly twice as many GM’s than the Americans?

That reminds me of when I was working for Volkswagen. There was a time when Volkswagen’s sales in the USA were at an all-time low, their customer satisfaction ratings were at the bottom of the scale. Volkswagen seriously contemplated exiting the US market and to focus on growth markets. Volkswagen did not retreat. Why? They knew that if they can’t compete in the world’s most demanding and most complicated car market, they eventually will not be able to compete in the world. They knew that to keep up with the demands for safety, emissions and driver comfort, they needed to be competitive in the USA. They stayed. Volkswagen still doesn’t play a big role in the USA. But Volkswagen grew to be the second largest car company in the world.

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  • Dolorean23 Dolorean23 on Oct 21, 2009
    The other alternative is for the Chinese to focus on the two growth markets, namely China at home and possibly neighboring India. China will never import cars from Tata or any other Indian company. Both countries are squarely at odds with each other over control of the Pacific rim economies. China has always had an inferiority complex in foreign relations and will continue to do business with the US and NAFTA to keep India out. Similiarly, India looks West to the former British colonies, Europe, and to Britain itself to fund its economic powerhouse against the Chinese. It doesn't seem that long ago when it seemed that everyone in America was up in arms about losing so much ground to the invading Japanese product market. Its worked out so well that most don't even think of Toyota as being a foreign brand any more. What's more is the Japanese and Koreans seem defiantly positioning themselves to deny the Chinese access to the lucritive American market share. re: blowfish. The Chinese love the Buick for the same reason some Americans do. Their roads aren't exactly the best and nothing soaks up road pitting like a softly sprung, living room couch LaSabre. Also, Buicks are mechanically sound in comparisson to what China produces itself and are highly efficient cruisers to boot.

  • Wsn Wsn on Oct 21, 2009

    Regarding drywall, I doubt any sane home owner would go out of their way to buy drywall from China and ship it here. Chances are, they bought the drywall/house will that drywall from an American company. So, don't blame China for that. Just as Geotpf said, sue the company/person that sold the stuff to you. Exactly who sold it to him, is not your concern.

  • Mike1041 At $300K per copy they may secure as much as 2 or 3 deposits of $1,000
  • Sgeffe Why on Earth can’t you just get the torque specs and do it yourself if you’re so-inclined?!
  • Sgeffe As was stated in another comment, the FAA nominee went down in flames. But the NTSB chairwoman certainly didn’t, and she’s certainly not qualified either!Lots of this kind of stuff going on both sides of the aisle—Ben Carson would have arguably made a better Surgeon General than HUD Secretary under Trump, for example.
  • Art Vandelay Interesting, the Polestar 2 I had as a rental utilized Android Automotive which is what GM said it is going to exclusively, yet it still offers Apple CarPlay according to this. Wonder if GM will do the same.
  • Stuart de Baker EVs just aren't ready for prime time for those with a single car and who take road trips. Being able to charge as soon as you arrive at a charging station, and even the chargers working on your car is a crapshoot. In the former case, you could have to wait for nearly an hour while someone else is charging.I also don't find EVs particularly fun to drive (I've driven a Tesla Model S and an Ionic 5.) I LOVE driving my '08 Civic (stick). I love the handling, the feel and responsiveness of the engine, the precise steering (the Michelin Pilot Ultra Sport tires help, but even with the snows on, the car is a joy). I have 152k on the clock, and hopefully another 25 years or so of driving (I was born early in the Eisenhower Administration and I have exceptionally healthy habits), and I'm going to try to keep the Civic for the duration.My Civic causes a less global warming emissions than some of these humongous battery operated trucks.