Report: Second Chinese Automaker Amassing Big Daimler Stake

by Steph Willems

Published: May 11th, 2019

report second chinese automaker amassing big daimler stake

A year after Chinese automaker Geely announced the purchase of a nearly 10-percent stake in auto giant Daimler AG, a second carmaker from the People’s Republic is reportedly interested in acquiring a piece of the German company’s action. A stealthy accumulation of shares could already be underway.

According to multiple sources who spoke with Reuters, BAIC Group, Daimler’s Chinese joint venture partner, wants a stake of up to 5 percent to cement the two companies’ partnership. Following Geely’s big share buy, the Chinese company surprised many by offering to save the failing Smart brand by turning it into a joint venture. Daimler was only too happy to accept the offer. A new generation of Smart vehicles are set to roll out of China in 2021.

Daimler is likely already aware of BAIC’s intentions, with two of the three sources saying the company informed Daimler of its plan earlier this year. BAIC has also reportedly sought Chinese government approval for the share purchase.

One of the sources claims BAIC has already begun purchasing Daimler shares on the open market, slowly accumulating the desired stake of an automaker that has announced it will not issue new stock. It’s hardly an inexpensive task — to reach a 5-percent stake, BAIC would need to scrounge up roughly 3.4 billion dollars.

Still, however many shares BAIC may have already bought, there’s still a way to go before it reaches is rumored goal. German law required buyers to notify regulators when their take of a German company reaches 3 percent, something that has not yet occurred.

While Daimler has told BAIC in the past that it wouldn’t drop its partner without the two reaching an agreement first, the Geely share buy and Smart partnership seems to have left the company rattled, leading to a similar stake-by-stealth plan as enacted by its domestic rival.

In March, Reuters reported that Daimler had asked Goldman Sachs for help in increasing its stake in BAIC, following China’s decision to gradually relax foreign ownership rules. Daimler holds a 9.55-percent stake its Chinese production partner and a 49-percent stake in Beijing Benz Automotive Company, the two’s joint venture.

[Image: Daimler AG]

#BAIC #China #Daimler #DaimlerAG #Mercedes-Benz #OwnershipModel #Shares

Steph Willems

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3 of 9 comments

Steve Biro on May 12, 2019

I know a number of people who have done business in China. The general consensus seems to be that the Chinese are capable of very high quality - but one must keep an eye on them for corner-cutting if you're talking about manufacturing through a third party. Examples 1 through 1000 might be fantastic. Example 100,000? Maybe not so much.

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- Featherston on May 12, 2019
  
  A friend's experience echoes some of the responses above. He launched a business which relies on proprietary IT hardware of his own design. He did research Chinese manufacture, going so far as to travel there to meet with potential suppliers. As it turned out, in order to ensure good quality, cost would have been on par with what it was for US manufacture. Furthermore, he had more confidence in maintaining quality and resolving issues if he were working with a US manufacturer. I'll note that his business provides a service. He's not selling the hardware on, he's using it. It *has* to work. Conversely, I've met more than a handful of North American and European executives--invariably men in their late-50s to late-60s and looking for another short-term score or two prior to retirement--who are happy to pass outsourced garbage on to their customers and their customers' clients. What do they care about the medium and long-term effects on clients, clients' customers, and indeed even on their own businesses and colleagues? There are some truly evil people out there; the president of my current employer is one. Caveat emptor.
  
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Mackie on May 12, 2019

Chinese manufacturers are capable of quality but they’d rather cut corners in order to increase profit. I’d never do business with a Chinese firm. They’re all sketchy as f**k. If you put your faith in a Chinese manufacturer, you deserve all the pain and headaches that will surely come to you.

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