Are China Vultures Circling General Motors and Chrysler?

Date posted: 11-20-2008
GUANGZHOU, China — The largest state-owned Chinese automakers may be poised to buy assets from General Motors and Chrysler, a government official said here.

According to the Chinese publication 21st Century Business Herald, state-owned companies such as Shanghai Auto and Dongfeng have the intention and the capability to acquire assets from the troubled Detroit automakers. The remarks were attributed to a senior official of China's Ministry of Industry and Information Technology, which regulates the auto industry.

Shanghai Auto, also known by the acronym SAIC, is China's largest automaker and is partnered with GM and Volkswagen. Dongfeng, the country's third largest carmaker, has no direct links with Chrysler, but has alliances with Kia, PSA Peugeot Citroën and Honda.

Earlier this week, Automotive News China reported that Chrysler's long-simmering deal with Chery Automobile appears to be disintegrating and that there now is little prospect that Chery will supply small cars to the U.S. company.

Inside Line says: At this point, nothing much would surprise us about the possible fate of GM and Chrysler. — Paul Lienert, Correspondent

Chinese Automakers may buy GM and Chrysler

by Bertel Schmitt
 

Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports. LINK A National Enquirer the paper is not. It is one of China's leading business newspapers, with a daily readership over three million]. This newspaper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?

A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he’s in deep trouble.

At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world’s markets with accepted brands, and proven technology.

The editors of 21st Century Business Herald, obviously with input from higher-up, writes that Chinese industry must change and upgrade. China wants their factories to change from low-value-added manufacturing to technically innovative and financially-sound high-value-add industries. Says the paper: “It would be much easier now for strong Chinese automakers to go global by acquiring some assets of their U.S. counterparts in times of crisis.”

Deloitte & Touche sees a trend: “Chinese automakers can start with buying out the OEM projects and Chinese ventures of some global carmakers such as GM and Chrysler.”

The Chinese appear to have bigger plans than an accounting firm can imagine. 21st Century Business Herald acts and writes as if its already a done deal, and the beginning of more to come. “In the coming two years China is likely to see a few of its large Chinese automakers and other manufacturing enterprises set a precedent for achieving globalization by acquiring global companies, just like SAIC or Dongfeng’s possible acquisition of troubled GM or Chrysler.”

Just in case you missed it, the Shanghai Automotive Industry Corporation (SAIC) is China’s largest auto manufacturer. In 1984, the company entered a joint venture with Volkswagen. A decade later, SAIC entered a joint venture with General Motors. In 2007, SAIC bought the Nanjing Automobile Corporation, which had acquired British MG Rover in 2005.

Dongfeng Motor Corporation is a public company, although 70 percent of their shares are reported to be in government hands. They also are one of China’s Big Three. The company has numerous joint venture partners, such as Nissan, Peugeot-Citroen, Honda, and Kia. Dongfeng (which means “East Wind”) was founded at the behest of Mao Zedong himself in 1968.

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yeah,....just what we need. some other country making shit for us.  What happened to good ole fashioned AMERICAN made.  Free capitalism.  Free to FAIL if thats what it takes.  Free to prosper.

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Ya think the UAW will like working for $12 a day minus benefits?

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Uhh...

Free capitalism says that if the Chinese auto company has the cash, then they can buy the stock....

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Not really. That's not free capitalism either. A Chinese company saying, "I want an American company" and the Chinese government pouring money into their pockets to acquire it (and you KNOW what's where this capital is going to come from) is no different from the US government acting to prevent that.

Free capitalism would be a Chinese company buying an American company with money they actually made. It would also be the American company not being at risk of bankruptcy or buyout because they could toss unionized labor out on their asses and rehire without worrying about anything bigger than angry unions.

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Not really. That's not free capitalism either. A Chinese company saying, "I want an American company" and the Chinese government pouring money into their pockets to acquire it (and you KNOW what's where this capital is going to come from) is no different from the US government acting to prevent that.

With the present stock price of many US car companies... I wouldn't be suprised to find that there's enough private equity in China (or Dubai) to buy one or more of them, W/O foreign govt assistance...


Free capitalism would be a Chinese company buying an American company with money they actually made. It would also be the American company not being at risk of bankruptcy or buyout because they could toss unionized labor out on their asses and rehire without worrying about anything bigger than angry unions.

Agreed on all parts... Fuck the UAW

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NO. NO NO NO NO NO NO NO NO NO.

I would rather they keep the UAW than go to the fucking Chinese government, and that's saying something.

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I wish china would just nuke us and get the ball rolling.

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Will they start serving rice and noodles at NASCAR races?

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yeah,....just what we need. some other country making shit for us.  What happened to good ole fashioned AMERICAN made.  Free capitalism.  Free to FAIL if thats what it takes.  Free to prosper.

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It's a neat closed cycle…

China > WAL*MART > US Consumers > China > GM > US Consumers > China

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[WillSmith]Oh, HELL no![/WillSmith]

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It's a neat closed cycle…

China > WAL*MART > US Consumers > China > GM > US Consumers > China

Quoted:
[WillSmith]Oh, HELL no![/WillSmith]

Quoted:

Not really. That's not free capitalism either. A Chinese company saying, "I want an American company" and the Chinese government pouring money into their pockets to acquire it (and you KNOW what's where this capital is going to come from) is no different from the US government acting to prevent that.

Free capitalism would be a Chinese company buying an American company with money they actually made. It would also be the American company not being at risk of bankruptcy or buyout because they could toss unionized labor out on their asses and rehire without worrying about anything bigger than angry unions.

Quoted:
Ya think the UAW will like working for $12 a day minus benefits?

Quoted:
yeah,....just what we need. some other country making shit for us.  What happened to good ole fashioned AMERICAN made.  Free capitalism.  Free to FAIL if thats what it takes.  Free to prosper.

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That is capitalism, FREE trade. I for one would love this idea, if of course the Chinese weren't red.