Delphi is the former GM parts division. It had been spun off, only to go into bankruptcy not much later. Delphi also was amongst the first to embark on an aggressive “source in China” policy. Large chunks of Delphi’s production were moved to China. Large chunks of Made-in-America cars were actually Made-in-China. Now, China buys large chunks of Delphi. Possibly all of it.
According to the Freep, two Chinese companies and the Beijing government banded together to buy Delphi Corp.’s brakes and suspension business. The Chinese auto supplier Tempo Group will acquire a 24 percent stake, China’s Capital Iron & Steel Co. will purchase a 51 percent stake, and the Beijing government will own the remaining 25 percent. They will form a new Chinese company called Beijing West Industries Co. Ltd., based in Beijing. Delphi needs the money:
Again according to the Freep, “The Chinese will pay $100 million in cash for the Delphi businesses. The deal gives Delphi, which is struggling to emerge from bankruptcy protection much-needed capital and allows them to exit businesses they are no longer interested in keeping.”
Delphi agreed earlier this month to sell its global steering business back to GM.
The deal also gives the Chinese industry access to know-how, technology, and markets: Delphi’s brakes and suspension business has more than 750 patents. It also employs 3000 people in the United States, Mexico, Poland, India and China.
The Freep celebrates this as “the most high-profile acquisition yet by the Chinese in the American auto industry.” This could quickly be old news. There may be bigger deals in the works.
Two weeks ago, Gasgoo (along with a bevy of other news outlets) reported that Beijing Automotive Industry Holding Corp. is interested in buying assets of Delphi or even a bid for all of Delphi’s assets. Beijing Auto is Daimler’s joint venture partner in China and used to be Chrysler’s joint venture partner. When this came up, a source at Beijing Auto mentioned that Delphi was already in the process of chopping its non-core businesses, such as brakes and suspensions. At around the same time, Beijing Auto was also rumored to have designs on Chrysler, but the rumor was quickly denied.
“If conditions permit, we do not rule out the possibility of acquiring Delphi,” as a whole, the source said. When these rumors circulated, Automotive News [sub] said that “Delphi and GM need each other to survive.” They cited Kirk Ludtke, senior vice president at CRT Capital, who said: “If Delphi runs out of money and has to shut down, GM shuts down too.” So by keeping Delphi alive, Beijing assists the US government in keeping GM alive. Unless a sloppy reporter had confused “Beijing West” with “Beijing Auto,” there might be more. “Step by step” is one of the core tenets of Chinese dealings.
Unlike most people here, this doesn’t worry me at all. I would be worried if MIT, Microsoft, Cisco, Boeing and such were in China, and industrial work requiring manual labor was done in the USA…
Would you believe that large chunks of Cisco ARE in China: Turn around a Cisco or Linksys (their consumer brand) router and you will see the label. Cisco also supplies large chunks of the fabled Chinese Firewall.
As for Microsoft, they have an excellent research center right here in Beijing. I worked with the guys and they do superb math-intensive stuff (in which the Chinese excel) especially in the image processing and video field.
According to the Boeing website, “China has a sophisticated and expanding part to play in the commercial aviation industry and has a role on all of Boeing commercial airplane models-737, 747, 767, 777 and the newest and most innovative airplane, the 787 Dreamliner. China builds horizontal stabilizers, vertical fins, the aft tail section, doors, wing panels, wire harnesses and other parts on the Next-Generation 737; 747 trailing edge wing ribs; and 747-8 ailerons, spoilers and inboard flaps, and parts of the horizontal stabilizer. China also has an important role on the new 787 Dreamliner airplane, building the rudder, wing-to-body fairing panels, leading edge and panels for the vertical fin, and other composite parts.
Since the 1980s, Boeing has purchased more than US$1,000,000,000 in aviation hardware and services from China. Today, Boeing and Boeing supplier partners have active supplier contracts with China’s aviation industry valued at well over US$2,500,000,000. Today, there are more than 5200 Boeing airplanes flying throughout the world with parts and assemblies built by China.”
It was Wagoner that first spun off Delphi, and then had to take it back as a bankrupt company.
This guy royally screwed up the US autoindustry.
America is just not a viable producer of cars anymore. The question is can America remain a superpower without a strong industrial base.
I would be worried if MIT, Microsoft, Cisco, Boeing and such were in China
Who do you think assembles or engineers much of what comes out of Microsoft or Cisco? Where do you think a sizable number of MIT graduates and undergraduates come from (and go)?
ETA: Bertel beat me to it.
There are no state secrets involved in making brake pads, disks, and suspension parts. The Chinese are perfectly capable on making them on their own, as a matter of fact, they probably already manufacture most of the world’s supply of these parts. What the Delphi acquisition gives them – assuming they bought the brand name and distribution parts – is a chance to “move up the value chain” and realize much higher margins then as a manufacturer who makes brake pads for the likes of Delphi, Visteon, etc. I wrote a little bit about the arcane topic in Gasgoo. Just in case someone is really interested in the nerdy aspects of global auto parts marketing.
The question is what is America suppose to do in the global economy. You can’t support a family flipping hamburgers.
The question is what is America suppose to do in the global economy.
Well there are about 142 million US jobs even in this dysfunctional time, and about 141.5 million of them involve neither flipping burgers nor making break pads, so I guess reality extends beyond your imagination.
I am still skeptical of China’s manufacturing abilities and technical know-how. Seems to me that they can’t even build dinky Walmart toys without NSFWing something up.
The Chinese will probably produce crap for GM, but then again since when does GM really care about quality. Now China can help GM produce vehicles that are not only low in quality, but also unsafe.
Good job…………..
Now let me get this straight. If the Chinese government owns 25 percent of a failing U.S. auto parts maker, that’s okay. But if the U.S. government lends money to an auto maker, that’s not okay. Especially if the lender insists on changes in the business model and management to make sure the loans will be paid back. I had always been told that the borrower was servant to the lender. Maybe I heard wrong.
Plenty of excellent quality products are being manufactured in China these days. The computer you are commenting from is likely chock full of Chinese made things.
As Bertel has pointed out before, you can get any level of quality you desire manufactured in China. Everything for Dollar Store crap to precision machinery. It all depends what is asked for.
97escort: Yes, the cognitive dissonance between China’s massive government led industrial/economic progress of recent years and traditional libertarian minded right wing American thought is indeed enough to make a person say WT*.
A fundamental touchstone of right wing thought has for years been that central planning and/or a national industrial policy doesn’t work. “Just look what happened to the USSR”. Meanwhile, Japan rose from ruin to power all out of proportion to its tiny island nation size based on governmentaly directed Industrial Policy. China is even more centrally planned and public/private integrated than Japan was … and China is pretty much kicking everyone else’s economic butts.
But, what kind of quality do I receive with a China-made five-dollah’ foot-long?
/Surprisingly bad. Subway is horrible here in Shanghai, and not that cheap. Much better to pony up for Wagas or Element Fresh!