U.S. suppliers lose luster among Chinese buyers
[2008-12-23 17:04:27]
U.S. suppliers lose luster among Chinese buyers
Source :
Automotive News
[Posted on Dec 8,2008 at 10:46]
SHANGHAI ??nbsp;As the crisis in the U.S. auto industry deepens, the assets of many American suppliers have for-sale signs out front.
But Chinese suppliers are less interested than they once were in making acquisitions in the United States.
"Chinese companies have recently had some bad experiences with acquisitions in the developed world," says Tom Tan, president of powertrain supplier BorgWarner China. "The lesson they have drawn is that they’re not yet up to the task of managing companies in the world’s most competitive markets."
A survey by consultant A.T. Kearney found that automakers and suppliers here were more interested in acquisitions in Russia, the Middle East, Southeast Asia and Latin America than in North America. While 35 percent named Russia, only 7 percent talked about North America. Even Africa rated more highly than North America or Europe as an investment destination.
Gun-shy
Chinese suppliers are losing interest in U.S. acquisitions.
? Other markets, such as Russia, offer better prospects.
? Chinese executives lack experience in mature markets.
? Some Chinese companies were burned by recent acquisitions.
Mood has shifted
Today’s mood is a far cry from two years ago. In 2006, Chinese suppliers riding high on a booming home car market made no secret of their desire to get their hands on the technology and market access of U.S. companies.
Bankrupt American suppliers were desperate for companies to save their loss-making subsidiaries. The match seemed perfect. For instance, in 2006, China’s biggest glass maker, Fuyao Glass Industry Group Co., was in talks to buy the glass-making operations of Automotive Components Holdings LLC, the parts company owned by Ford Motor Co.
Fuyao’s chairman, Cao Dewang, declines to comment on the state of the deal. But he agrees that U.S. component makers are now looking much less attractive as takeover targets to him and his peers.
"If a factory lost money for its American owners, it’ll lose money for you in the same old way," he says.
Wanxiang Group and Weichai Power Co. Ltd. ??nbsp;two big Chinese component makers ??nbsp;entered talks to take over businesses belonging to Delphi Corp., which is operating in U.S. Bankruptcy Court. Two more suppliers, Dongfeng Motors and Minth Group, also were reported to be negotiating for similar purchases with Delphi and Visteon Corp.
Since then, the yuan has appreciated about 17 percent against the dollar, meaning it takes fewer yuan to purchase American assets. Yet despite their greater spending power, Chinese suppliers are less, rather than more, enthusiastic about making U.S. acquisitions. The reason: a string of well-publicized failed overseas takeovers.
Burned overseas
For example, in 2004 China’s TCL Multimedia Technology Holdings Ltd. acquired the ailing TV business of France’s Thomson SA. That led to huge losses for TCL, amid general recognition that the Chinese had severely underestimated the task of turning the business around.
The example of Ssangyong Motor Co.’s acquisition by Shanghai Automotive Industry Corp. also has become industry lore.
SAIC took over Korea’s fourth-largest carmaker in 2004. Bad management led to a strike by Ssangyong workers and then rumors ??nbsp;denied by SAIC ??nbsp;that the Chinese were planning to sell off their troubled acquisition.
Delphi, Visteon, Wanxiang, Wei-chai, Dongfeng and Minth all declined to comment for this report.
Fuyao Glass??nbsp;Cao also says Chinese executives are unfamiliar with Western labor unions.
Steve Dyer, a consultant at A.T. Kearney, agrees. "I’ve known deals that did not go through because the buyer could not guarantee the unions that there would be no job losses," he says. "The Chinese have no experience of dealing with this issue and that makes them wary."
Lack of global experience
Moreover, the general realization has grown that Chinese entrepreneurs are often out of their depth when they venture into the sophisticated markets and legal systems of the developed world.
"If Delphi can’t handle its loss-making units, how can the Chinese?" asks Kevin Chen, whose Web site, www.gasgoo.com, works as an intermediary connecting Chinese suppliers to global automakers. "They just don’t have the international management talent."
In its survey, A.T. Kearney asked Chinese respondents for the biggest obstacles to overseas acquisitions. They cited lack of experience with mergers and acquisitions, integration complexities and a lack of market knowledge.
Interestingly, Indian carmakers and supplier companies also questioned for the survey did not share the caution toward the industrial world. Of 13 Indian companies responding, 50 percent said North America was the destination they were most interested in for acquisitions, while 36 percent named Europe.
A.T. Kearney’s survey was conducted as part of its annual Townsend Report on trends in the global automotive industry.
But Chinese suppliers are less interested than they once were in making acquisitions in the United States.
"Chinese companies have recently had some bad experiences with acquisitions in the developed world," says Tom Tan, president of powertrain supplier BorgWarner China. "The lesson they have drawn is that they’re not yet up to the task of managing companies in the world’s most competitive markets."
A survey by consultant A.T. Kearney found that automakers and suppliers here were more interested in acquisitions in Russia, the Middle East, Southeast Asia and Latin America than in North America. While 35 percent named Russia, only 7 percent talked about North America. Even Africa rated more highly than North America or Europe as an investment destination.
Gun-shy
Chinese suppliers are losing interest in U.S. acquisitions.
? Other markets, such as Russia, offer better prospects.
? Chinese executives lack experience in mature markets.
? Some Chinese companies were burned by recent acquisitions.
Mood has shifted
Today’s mood is a far cry from two years ago. In 2006, Chinese suppliers riding high on a booming home car market made no secret of their desire to get their hands on the technology and market access of U.S. companies.
Bankrupt American suppliers were desperate for companies to save their loss-making subsidiaries. The match seemed perfect. For instance, in 2006, China’s biggest glass maker, Fuyao Glass Industry Group Co., was in talks to buy the glass-making operations of Automotive Components Holdings LLC, the parts company owned by Ford Motor Co.
Fuyao’s chairman, Cao Dewang, declines to comment on the state of the deal. But he agrees that U.S. component makers are now looking much less attractive as takeover targets to him and his peers.
"If a factory lost money for its American owners, it’ll lose money for you in the same old way," he says.
Wanxiang Group and Weichai Power Co. Ltd. ??nbsp;two big Chinese component makers ??nbsp;entered talks to take over businesses belonging to Delphi Corp., which is operating in U.S. Bankruptcy Court. Two more suppliers, Dongfeng Motors and Minth Group, also were reported to be negotiating for similar purchases with Delphi and Visteon Corp.
Since then, the yuan has appreciated about 17 percent against the dollar, meaning it takes fewer yuan to purchase American assets. Yet despite their greater spending power, Chinese suppliers are less, rather than more, enthusiastic about making U.S. acquisitions. The reason: a string of well-publicized failed overseas takeovers.
Burned overseas
For example, in 2004 China’s TCL Multimedia Technology Holdings Ltd. acquired the ailing TV business of France’s Thomson SA. That led to huge losses for TCL, amid general recognition that the Chinese had severely underestimated the task of turning the business around.
The example of Ssangyong Motor Co.’s acquisition by Shanghai Automotive Industry Corp. also has become industry lore.
SAIC took over Korea’s fourth-largest carmaker in 2004. Bad management led to a strike by Ssangyong workers and then rumors ??nbsp;denied by SAIC ??nbsp;that the Chinese were planning to sell off their troubled acquisition.
Delphi, Visteon, Wanxiang, Wei-chai, Dongfeng and Minth all declined to comment for this report.
Fuyao Glass??nbsp;Cao also says Chinese executives are unfamiliar with Western labor unions.
Steve Dyer, a consultant at A.T. Kearney, agrees. "I’ve known deals that did not go through because the buyer could not guarantee the unions that there would be no job losses," he says. "The Chinese have no experience of dealing with this issue and that makes them wary."
Lack of global experience
Moreover, the general realization has grown that Chinese entrepreneurs are often out of their depth when they venture into the sophisticated markets and legal systems of the developed world.
"If Delphi can’t handle its loss-making units, how can the Chinese?" asks Kevin Chen, whose Web site, www.gasgoo.com, works as an intermediary connecting Chinese suppliers to global automakers. "They just don’t have the international management talent."
In its survey, A.T. Kearney asked Chinese respondents for the biggest obstacles to overseas acquisitions. They cited lack of experience with mergers and acquisitions, integration complexities and a lack of market knowledge.
Interestingly, Indian carmakers and supplier companies also questioned for the survey did not share the caution toward the industrial world. Of 13 Indian companies responding, 50 percent said North America was the destination they were most interested in for acquisitions, while 36 percent named Europe.
A.T. Kearney’s survey was conducted as part of its annual Townsend Report on trends in the global automotive industry.
Source: 中华汽配网
Keywords:AUTO; vehicles; Engine
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