Beijing Auto, a.k.a. BAIC, is not giving up on its aspirations for owning a western brand. They came a little late in the race for Opel, and were used as bogeymen to pressure everybody into an 11th hour deal (which is in doubt). Just two days ago, BAIC was rumored to covet Saab. What else is for sale? Ah, yes, Volvo. The WSJ has it on good authority that BAIC “has expressed interest in acquiring Volvo, becoming the second Chinese company to eye the Swedish unit of Ford Motor Co.” The first Chinese company wooing Volvo of course is Geely—maybe.
According to the WSJ, Geely has already done due diligence, inspected plants and books, and Geely is considered as the front runner in the Volvo Open. However, Geely denied it is bidding for Volvo. Geely said in a notice to the Hong Kong stock exchange in mid-May that “the company has not submitted, and has no plans to submit, any bids concerning the takeovers of ‘Volvo’ or ‘Saab’ as stated in recent press articles.”
As far as BAIC goes, they are going to Gothenburg. The WSJ has it that “a team of executives from Chinese government-owned Beijing Auto was expected to visit Volvo’s Swedish headquarters as early as Thursday to meet with its executives and tour its research-and-development and manufacturing facilities.” Tsk, tsk: BAIC is not owned by the “Chinese government.” It belongs to Beijing’s government, as in the municipality of Beijing. Can get confusing sometimes, we know.
Beijing Auto is experienced in working with foreigners. In 1983, they entered a joint venture agreement with AMC to build the Jeep Cherokee. They beat out SAIC and VW by a few months for the title of the first joint venture with a foreign car company. The Jeep JV, which is still on-going, led to a JV with Daimler to make Mercedes C-Class and E-Class cars. They also have a JV with Hyundai.
Bloomberg picked up the story later, adding, “Ford is seeking about $2 billion for Volvo, less than a third of what it paid for the maker of sedans and station wagons a decade ago.” Bloomberg calls BAIC “closely held.” Closely held they are.
Volvo’s JV partner in China of course is Changan, which may or may not still be in the race. Should either Geely or BAIC get Volvo, then Changan would have to JV with the successful bidder. The Chinese auto industry, which sports some 100 automakers, 14 of them considered serious ones, is supposed to consolidate, as per the wish of the Chinese government. One of these consolidations may as well condense around Volvo. Or not, as they say around here.
Of all the brands up for sale, Volvo has the most value to a Chinese acquirer. Unlike Saab, Volvo has maintained significant product development expertise during its years of absentee ownership.
If a Chinese company picks up Volvo, moves manufacturing to China and does so without in any way compromising quality and then uses their low cost base to price a Volvo S60 class vehicle up against the Camry in the US, they will sell boatloads of them and could change the whole game.
To those skeptics who say the Chinese couldn’t do so, I say bunk. China is quite capable of building world class products. iPhone anyone?
BTW, this possibility is why Ford would be strategically foolish to sell Volvo to a Chinese buyer.
A large number of Volvo cars are being made, or are slated for manufacture in China by Changan. These cars are being made using the same technology and processes as in the West. They could be exported tomorrow.
Bertel, doesn’t it seem most logical that Changan would consider buying up Volvo, since they are the company manufacturing them in China? I know they also have a deal with Volvo’s current parent, Ford, and build Ford products (and Mazda products) in China.
(I have a 2008-2009 Cars of the World book which is quite interesting)
I’d be curious to know if you agree with my thoughts on current Chinese ars which could potentially be ready for export to the west, including even the US, once the worldwide economy comes off its knees.
Brilliance FRV hatchback, BC3 coupe, BS4 sedan and wagon, BS6 sedan (I saw these all – except the wagon – at the 2009 Detroit Auto Show)
BYD F3e sedan (electric – I think it’d need a reskin to disguise the stolen last-gen Corolla looks), F6DM sedan (hybrid – once again, reskin to hide the stolen last-gen Accord looks), e6 Minivan (electric) (I saw the F6DM and e6 at the 2009 Detroit Auto Show)
Changcheng (Great Wall) electric 2 seater and electric 4 seater
Chery Storm 2 sedan, A3 sedan, A6 sedan, A2 sports hatch and B12 sedan with V6
Geely Panda hatchback, FC-2 sedan, FC-E electric sedan, GC sedan
FAW B50 and B70HV hybrid sedans
Hafei S V, S III sedans and S II minivan
(These will be imported with electric powertrains into the US by this fall, apparently)
Huatai sedan and SQ SUV (the ex-Santa Fe – Hyundai may not allow it tho)
JAC B18 sedan and B23 sedan, HFC SUV (the ex-Santa Fe – once again, Hyundai may not allow it)
Lifan 620 sedan
MG M55 and M75 sedans
Shanghai Maple E3 sedan, E4 sedan, London taxi
With all of that, mightn’t China be soon ready to consolidate some of these manufacturers as previously planned, and start exporting soon?
Trouble with this scenario is that so many jobs are leaving the US (80% of job losses in the last 9 to 12 months in the US have been men, so the number of females being laid off work is obviously significantly smaller than males).
Perhaps the Chinese would be willing to treat the US like a 3rd world country and set-up CKD assembly halls to put the imported cars together on US soil…
menno:
Bertel, doesn’t it seem most logical that Changan would consider buying up Volvo, since they are the company manufacturing them in China?
Yes it would.
I’d be curious to know if you agree with my thoughts on current Chinese ars which could potentially be ready for export to the west.
The new generation cars made under joint venture contracts definitely would be. That’s why Changan/Volvo makes the most sense. However, as intimated, if a bigger company buys the brand, Changan may just be prompted to merge, or take a hike.
BTW, this possibility is why Ford would be strategically foolish to sell Volvo to a Chinese buyer.
+1
Don’t do it, Alan! You think you might need the few (hundred?) million dollars selling Volvo right now, but think of the billions you will be losing in the future by giving the Chinese an engineering gift of this magnitude.
If you have to sell, however, don’t settle for less than the $6 billion Jacques Nasser paid for the company PLUS every cent Ford has so far lost on Volvo.
Don’t sell to the Chinese!! Figure out a way to lure Renault into the bidding, as they also wanted Volvo a few years back.
come to think of it… why hasn’t Volvo AB stepped up to buy it back at a firesale price?