Official cautions sector on M&A

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By Li Fangfang (China Daily)
Updated: 2009-03-06 07:54

Chinese carmakers may consider overseas acquisitions, but they should do so cautiously, said officials and analysts.

Miao Wei, vice minister of of industry and information technology, said he hopes to see local carmakers making overseas acquisitions as the country tries to develop a globally competitive auto industry, reported Bloomberg yesterday.

Domestic automakers may be considering overseas investments, said Miao, the former president of China's third-largest carmaker Dongfeng Motor Corp, refusing to elaborate further.

US automakers are considering shedding unprofitable brands and assets to pare their massive debts and survive an unprecedented financial crisis.

General Motors Corp, struggling to survive with financial support from the US government, has decided to sell its Saab, Opel, Hummer and Saturn brands, while Ford Motor Co, also headquartered in Detroit, has announced its intention to sell its Swedish brand Volvo.

The automakers from China, a still-growing market in the worldwide industry recession, are expected to place indicative bids to the waning brands.

Chery Automobile Co, one of China's biggest homegrown automakers, said last month that it would not rule out the possibility of buying a troubled European auto brand to boost its overseas expansion.

Changan Automobile and Dongfeng Motor are expected to place a combined bid for Volvo in April, Reuters reported.

"The troubled foreign automakers are providing Chinese rivals opportunities to have the world-class technologies, brands, talent and distribution network they need through acquisitions," said Chen Bin, head of the industry coordination department of the National Development and Reform Commission.

However, he also said that challenges exist along with opportunities.

"Chinese carmakers are not strong enough to participate in cooperation with big global players," said Chen. "They have to be cautious and think it over before making a decision."

Miao said the biggest challenge for Chinese automakers making overseas deals would be finding the right people to run the larger company.

Jia Xinguang, an auto analyst, said the foreign technologies are also a bottleneck for the Chinese manufacturers. "They are not capable enough to master the technology completely and continue the R&D on it."

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