As reported by TTAC weeks ago, Chinese auto makers are seriously looking into buying all or some of General Motors. The story was never officially denied in China. Now, there are fresh and more concrete indications about a possible Chinese move on GM. Hu Xindong, Secretary to the Chairman of China’s third largest auto maker Dongfeng, said they have been contacted by financial groups which have close relationships with GM. Topic of the discussions: A possible takeover. This according to China’s National Business Daily via Gasgoo. His company “has not started formal discussions yet,” said Dongfeng’s Hu. He also said that “for the moment,” Dongfeng Motor has no intent to take over GM as a whole. They are interested in buying “overseas assets.” In China, “overseas” usually means outside of China. Hu: “Our managing board has not officially considered the option yet.” In China, where one never gets a clear yes or no, these statements are tantamount to a “Hell yes! We are crunching numbers day and night!” When Dongfeng was floated weeks ago, eyebrows went up. Wouldn’t SAIC, GM’s longtime Chinese partner, be a better fit? So, where did SAIC go?
Category: China
Beijing’s sizable German community congregated today at the annual Weihnachtsmarkt. At the German Embassy inside the People’s Republic of China, party-goers loaded-up on Bratwurst, Christstollen and got seasonably drunk. Volkswagen China, headquartered ’round the corner, sponsored a stand at the festival. Not to sell cars. No, they were hawking their fabled “VW-Currywurst,” a culinary delight served every Thursday to the working classes at Wolfsburg’s cafeterias. At the sidelines of the event, and under the influence of truth serums such as Radeberger Pilsner or Glühwein, leading Volkswagen of China execs reiterated what had been the talk around Sanlitun for months: VeeDub is defying gravity in China. In fact, they’ll probably sell more cars in China this year than their parent sells in Germany. According to Gasgoo, Jörg Müller, CFO of VGC (Volkswagen Group China) made the prediction in August. In October, VGC pronounced themselves over target.
Take that, you (formerly) capitalist running dogs: At the Guangzhou auto show, British German luxury car maker Bentley said that the VW-owned brand plans to sell more Bentleys in China than in the US. They said it to Guangzhou Daily (via Gasgoo.) Bentley’s conservative goal is to do this by 2012, but at the rate everything is going (and soon walking,) they’ll be done with that much earlier. With 10% of Bentley’s global sales, China already is the world’s fifth largest market for Bentley. In 2008, China is expected to surpass Japan in terms of Bentleys sold, making the Middle Kingdom king of Asian Bentley sales. Next stop: Trump the UK and the US, rule the world. In Bentley terms.
On display at the Guangzhou show is the Bentley Arnage RL, Bentley’s bestseller in China. For four straight years, no country consumed more Arnages than China. Also to be seen: The Continental GT, Continental GTC and Continental Flying Spur. What’s the world coming to. Niedermeyer putters along with a golf cart, China soaks up Flying Spurs.
Last week, Oregon Governor Ted Kulongoski clinched a deal to bring Nissan’s pure-electric cars to his state. Then, he went on to Shenzen, China. “At BYD Auto Co., China’s fast-growing automotive star, a plug-in electric hybrid sedan is just weeks from meeting millions of Chinese consumers” writes the Oregonian. “The F3DM, which runs up to 80 miles on a single charge and packs a 7-gallon tank, will probably launch in the United States by 2010.” The Governor wants it to be built in Oregon. On Friday, he met with BYD President Wang Chuanfu. On a 10-day business trip through Asia, Kulongoski had laid out his vision to automakers in Japan and China: Electric charging stations every 60 miles along interstates. Tax incentives for Oregonians to buy electric cars. Tax bonuses for drivers to build car chargers in their garages. And, unspoken, but you can bet on it: generous incentives for those who bring their factories to Oregon. Then, Kulongoski has guanxi, connections, indispensable for a successful Chinese deal…
Seeking Alpha prides itself “the premier financial website for actionable stock market opinion and analysis.” When it comes to what should happen with GM, they are on our side: “Buyout better than bailout,” writes Seeking Alpha. Roger that. We have been picking-up indications that Chinese automakers SAIC and Dongfeng may have plans to buy assets of GM (and while they are at it, maybe even of Chrysler). China would get what it badly needs for its thriving domestic car industry to become an even more thriving international car industry: accepted brands, a worldwide distribution network and know-how necessary to comply with US and worldwide standards. Apparently, private equity firms are keen to aid this “transfer.” Behind all of this (of course) stands the Chinese government. The People’s Republic owns most of automakers SAIC and Dongfeng, along with a good chunk of the private equity firm Blackstone, a good chunk of Morgan, and a good chunk of T-bills (to the tune of $585b).
The story that Chinese SAIC and Dongfeng are thinking (aloud) about buying GM or Chrysler, or maybe both, created a firestorm on both sides of the no longer so Pacific Ocean. Just in case someone still thinks it’s a fluke, the Chinese media is chockablock full of the story. It’s all in (duh) Chinese, but trust us: from mass-outlets like Sina.com all the way to the government-owned Autoinfo.gov.cn, their headlines shout (in Chinese: ) “SAIC and Dongfeng intend to buy GM.” As far as more substance to the story goes, there’s not much to report. We and our friends over at Gasgoo made some phone calls to the parties involved, and first received nothing but a “wu ke feng gao,” which the Mandarin-speakers amongst the B&B recognize as a “no comment.” Then, the denials poured in.
“GM will not sell its joint ventures,“ said Zhou Fangyu, former director of GM Business Development Department. An anonymous source at SAIC told Gasgoo.com reporters in a phone interview that he “hasn’t heard of SAIC’s plans to buy GM or Chrysler.” However, he also noted that “it may be possible for SAIC to buy some suppliers or joint ventures of GM in China.” A definite maybe. And then …
Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. [A National Enquirer the paper is not. It is one of China’s leading business newspapers, with a daily readership over three million.] The paper 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?
Ouch, that hurts, or “tong, tong!” as they say in China. “China’s largest automaker, SAIC Motor Corp, is poised to surpass the combined market value of General Motors Corp. and Ford Motor Co.” Bloomberg followed the market capitalization of the three automakers as far back as the year 2000. Then, Ford and GM were worth $100b, about 50 times the value of SAIC. At the end of last week, the difference shrunk to a mere $570m. As the stock of both GM and Ford are twirling further down the toilet, the Shanghai auto maker will soon be bigger than both former Detroit giants together. Says Bloomberg: “GM most recently traded at $3.01 per share in New York Stock Exchange composite trading and Ford was at $1.80, for a combined market value of $6.14 billion. SAIC shares ended the week at 5.8 yuan (85 cents), for a value of $5.57 billion.” Want some background?
Guess who will be at the 2008 Los Angeles auto show, November 21-30? A Volkswagen Passat. But it won’t be just any Passat. It will be a Passat produced by Shanghai VW. As if this is not shocking enough: The thing will be powered by a hydrogen fuel-cell. Shanghai Security News humbly reports that this might be the “first China-made new-energy car model of the Volkswagen brand to be displayed at an auto show.” It for sure is the first Made-in-China VeeDub ever to enter a US show. And it runs on hydrogen. How about that. The powertrain was jointly developed between SVW’s SAIC, Tongji University and Shanghai Shen-Li High Tech Co., Ltd. The car, veedubbed “Lingyu,” will reach a top speed of 150 km/h and should be good for more than 300 km at one hydrogen charging, albeit “with further innovation and maximization,” say the Security News via Gasgoo. SVW had built 500 fuel-cell hybrid sedans already for the green Olympic fleet, and wants to mass-produce the hydrogen fuel-cell Lingyu by early 2010. But will it sell?
A few days ago, we told you that the Chinese government will enact “nine measures” to prop up the ailing auto export sector. In the meantime we got our hands on the nine measures. Turns out (some may say, in typical Chinese fashion) that it’s only eight. 8 is a lucky number in China. Some of the measures are fluff, such as government support for car and parts shows, help for ailing shipping companies, advertising support (oddly, targeted at “Russia, Ukraine, South Africa, Vietnam, and Iran,”) and a ban on exporting used Chinese cars. Here are the biggies:
As reported here, Daimler AG plans to increase its sourcing of automotive components from China nearly eight-fold within four years. The luxury car maker will buy $3.25b worth of car components per year in China. Now, BMW is itching to get in on the act. Not that BMW is new to buying parts in China, they have done that for years, mostly unbeknown to their well-heeled customers. BMW and Daimler are in talks to create a huge buying co-op. They want to create critical mass, and drop the bomb on their Chinese suppliers, the German Handelsblatt reports. By concentrating their buying power, Beemer and Benz intend to save €350m per year, in discounts alone. To assuage their American clientele, they say that they will also extend the stingy hand of their allied purchasing departments to parts suppliers in the U.S.A. However, with the dollar high and U.S. parts manufactures dead, or on the brink of extinction, the BMW/Mercedes buying axis is squarely targeted at China. The “deeper discounts” news from Deutschland already has Chinese parts makers atwitter and alarmed. Here is why ….
With the end of the (Western) year in sight, Chinese auto makers look in their books, roll their eyes, and sigh. One by one they come to the same conclusion: this year’s targets are toast. Bu hao, no good. According to a tally by Gasgoo, five Chinese auto makers have officially written off their old targets and revised them way down: Changan Mazda (-50 percent); Dongfeng Yueda Kia (-20 percent); Dongfeng Peugeot (-31 percent); Dongfeng Citroen (-27percent); FAW-VW’s Magotan (-22 percent). This doesn’t mean that their year-on-year sales will be down by that much. They probably started the year with optimistic growth rates. Which are now coming home to rust. Other companies don’t want to throw in the towel yet, or they say it’s too early to call. But ending October, most of China’s big auto makers were way off course.
The auto industry and auto exports have top billing in China’s current 5 Year Plan. (Yes, for sentimental reasons, they still have one of those.) Yet when it comes to the car export part, China is still light-years away from fulfilling their master plan. The Vice Director General of the Department of Mechanic, Electronic and Hi-Tech Industry, Ministry of Commerce, made the startling admission. “China’s auto exports are still in the early stage, leaving a large gap in global exports,” Zhou Shijie told Xinhua. Translation: China’s auto exports are in the doghouse of the export powerhouse. “It is difficult for export companies to master the vehicle entry policy in foreign countries.” Translation: Our cars failed miserably in crash tests, we have trouble with pesky U.S. FMVSS and European ECE regulations, which we can barely comprehend (let alone satisfy). We’re fed up and we’re not gonna take it. No, we’re not gonna take it. Uh-oh.
Dig through the dire news about GM floating around this morning’s autoblogosphere, and you just might notice a story that doesn’t quite jive with all the doom and gloom. Bloomberg reports that GM is “in talks with a local partners” to increase its 34 percent stake in GM-SAIC-Wuling, a Chinese light-truck and van maker. As our man in Beijing reports, China is aggressively stimulating its car market (which has bottomed out, by Chinese standards, at 11 percent growth) and GM wants in on the action. Of course there are just a few issues with the move– beyond the fact that GM has no cash with which to make such a deal. SAIC currently owns 50.1 percent of the consortium, and its Chairman Hu Maoyuan tells Bloomberg that it won’t be giving up its majority. “GM and our partner in Guangxi (Wuling) are still discussing how to settle the share transfer,” says Hu. So GM wants to spend cash it doesn’t have to increase a non-majority stake in an overseas joint venture. Non-starter, right? Not according to Ricon Xia, an analyst with Daiwa Associate Holdings…
China’s closely-watched auto sales stats are in. During the first month after the start of the worldwide auto industry meltdown, the first month after China awoke from the self-inflicted paralysis (a.k.a. the Olympics), sales are growing, but slowing. Compared to last year, China’s vehicle output and sales both grew 11 percent from January through October. October sales accounted for 715,700 units, up 3.37 percent year-on-year. Other countries would party after having received these numbers. In China, they come as a shock. According to China Associations of Automobile Manufacturers (CAAM) [via Gasgoo], China produced 8.02 million motor vehicles– and sold 7.94 million from January to October. Oops.
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