SAIC and Dongfeng taking aim at Detroits Big Two?
GM and Chrysler appear to be the two biggest losers from the recent credit crunch, Ford seems to be struggling, but they at least have the benefit of very strong Euro and China sales to back them up, GM are doing extremely well in China, and to a lesser extent Europe, but poor old Chrysler seems to suffering the most, with it largely relying on US sales, and what ever it can sell overseas.
Rumors have been circulating for quite some time that one of the Chinese big three (FAW, SAIC, Dongfeng) would pick up the pieces of GM, and Chrysler at some point. Rumors hit breaking point today at the Guangzhou Auto Show when reporters pinned down GM spokesman with questions, asking if GM was planning to sell of its China joint ventures (GM-SAIC, and GM-Wuling). GM posted a net profit of 3.8 billion RMB during Jan-September 2008, which shows that China is still a massively profitable market for GM, even if sales in the USA are currently tanked.
Its unlikely that SAIC or any other big player in the Chinese automative market would make a bid for such an ailing giant in the current market, several Chinese manufacturers have failed to reach their sales goals for this year, and some are even laying off workers. What we could see is Chinese players taking over suppliers to Detroits big three in the USA, this would be an excellent time for the Chinese big players to get hold of a supply chain that is well experienced in designing, producing, and supplying quality components on a strict timetable, this is something that can be succesfully carried over to production of Chinese cars in China, and improving the quality aspects that many Chinese cars suffer from.
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I hope any would be Chinese buyer of GM and Chrysler should be aware that GM has a short-term debt of $25 billion owed to its suppliers. Take over GM, and watch all those GM suppliers fly over to China with unpaid bills worth $25 billion…
I hardly think that 3.8 Billion RMB is massively profitable – convert that into USD and then look at their other debts, its not even a spit in the bucket.
that is about $500 million US, which is what GM loses in about two weeks.
The idea that the Chinese could go after suppliers in the US is not laughable. Not sure how it helps the Chinese, though. The value of a supplier is the relationships to a line of cars – and if that line disappears a supplier is worth pennies on the dollar. I guess they could just take the factory and ship it to China, but I suspect the Chinese have already done that…..
You could easily split Holden, Daweoo and the GM china JVs into a newcorp and try to sell that to the Chinese. Maybe toss Buick in their for the brand name.
Charlie,
Rumor has it that SAIC may stick an offer in for GM-Holden, but will the aussies be willing to see their ‘national brand’ dissappear into China?
Aussies don’t own GM and have no say on what happens to Holden.
The real issue is in a GM liquidation something like Holden is only worth the branding; the relationships between other GM entities and suppliers would make it impossible to keep it together as a going concern.
Holden as a brand is probably stronger than most people outside AU-NZ think. No new vehicles out of the GMH brand are sold so everything (GM branded) is a Holden in the publics eyes. Only the Commonwhore is made in Australia but that like other GM vehicles are sourced worldwide and are part of the GM global food chain as are many Ford vehicles as well. Selling Holden will make GM lose more money in the long term.
On a plus side, SAIC buying Holden might bring the V8s back to Shanghai for a second time;)
I don’t know why SAIC and Dongfeng need to get themselves this mess though, even the Big Three countrymen in the US there won’t help them/bail them out.
Didn’t congress ask them to show where/how/why they needed the money and they had no answer. Hopefully they have a better repsonse when they meet again in Dec. Why congress didn’t ask the same about bailing out Wall Street is beyond me.
Personally I don’t think Chrysler should get anything as they are owned by an investment firm (cerebus)which also has its hand in the GM pie (gmac) as well. Shouldn’t this be a conflict of interest?
My firm has gotten countless calls from Chinese companies looking to buy US suppliers, but none of these has ever gone anywhere because the prices sought seem to be about double what the Chinese (these companies anyway) are willing to pay.