Why Are Chinese Firms So Interested In U.S. Auto Divisions?
Last week I noted that Saab may be dead. Some more news today indicates that, while the brand may cease to exist, some of its assets may live on in the possession of Beijing Automotive Industry Holding Co. It would not be the only Chinese auto company involved in auto unit purchases this year: GM is also reportedly selling Hummer to a Chinese firm, and Ford is in talks to sell Volvo to another Chinese company. So why are the Chinese so interested in these assets that the U.S. firms are eager to cast away?
First, cash-rich companies circle like vultures when a firm is feverishly trying to sell assets. These days, however, few companies across the globe have money burning a hole in their pockets. Chinese firms have more cash than most to make purchases.
Second, some of these acquisitions can make great strategic sense. For example, Bloomberg quotes German auto expert industry Stefan Bratzel on the potential Saab asset acquisition:
Beijing Auto "is one of the potential candidates because Chinese manufacturers are looking for a foothold in Europe and need the distribution network, the technology and the brand."
If Beijing Auto already had a sufficient presence everywhere that Saab's assets might help, then it probably wouldn't be so interested. But since the firm has a goal of expanding in Europe, Saab's assets could help.
Third, Chinese companies believe they can succeed where the U.S. companies failed. Some of this might be cockiness, but there are other more tangible reasons. For example, you know those expensive union wages and benefits that helped to bring the U.S. auto companies down? Chinese companies don't have that problem.
As U.S. auto companies continue to shed assets, I think Chinese companies will remain some of the most interested. Chinese firms across many industries are looking to expand globally, so it makes sense that such assets would interest them. If they do manage to make these brands successful where U.S. companies could not, then that will make the U.S. firms look even worse. But by paying bargain prices and facing lower costs, that might just happen.