China carmakers see little value in GM or Ford assets

By Fang Yan ReutersPublished: July 15, 2008世界论坛网 http://www.wforum.com/gbindex.html

SHANGHAI: China's fledgling carmakers see little to gain from buying assets or equity stakes in General Motors and Ford Motor, dismissing speculation that they could help the faltering U.S. giants.世界论坛网 http://www.wforum.com/gbindex.html

At first glance, it appears to be an appealing match.世界论坛网 http://www.wforum.com/gbindex.html

Chinese automakers are eager to enter the North American market, the world's largest, and the problems at General Motors and Ford are deepening. GM shares are at a 54-year low, and Ford was forced by slumping sales to abandon its profit goal for 2009.世界论坛网 http://www.wforum.com/gbindex.html

But Chinese automakers, from SAIC Motor to Chery Automobile, responded coolly when GM shopped around its Hummer unit and Ford reviewed the prospects for Volvo.世界论坛网 http://www.wforum.com/gbindex.html

"We haven't had any discussions at the management level to consider either Volvo or Hummer," said Jin Yibo, a spokesman for Chery, a fast-growing maker of inexpensive cars.世界论坛网 http://www.wforum.com/gbindex.html

"We are moving gradually to enter the higher-end segment ourselves. We are also talking with Fiat and others about making premium models."世界论坛网 http://www.wforum.com/gbindex.html

Chery, which made its name with the QQ, China's best-selling subcompact, has already signed an agreement for a joint venture with Fiat to make Alfa Romeos.世界论坛网 http://www.wforum.com/gbindex.html

Chery was seen as a potential contender for Volvo partly because of its similarity to Tata Motor, which makes the Nano, the world's least-expensive car. Tata, the Indian automaker, completed the purchase of the Jaguar and Land Rover brands from Ford last month for $2.3 billion.世界论坛网 http://www.wforum.com/gbindex.html

But just as analysts doubted whether Tata could succeed with those premium brands where Ford failed, many also question whether Chinese automakers could engineer a turnaround at Volvo or Hummer. Limited international exposure, and a lack of technical and managerial savvy, could weigh against Chery and other Chinese automakers, some analysts say.世界论坛网 http://www.wforum.com/gbindex.html

"Volvo and Hummer are still seen by many as solid and prestigious brands even though they are not making much money," said Matthew Kong, associate director of the Asia-Pacific corporate team at Fitch. "But will that perception still hold if they are China-made?"世界论坛网 http://www.wforum.com/gbindex.html

Ford wrote down the value of the unit by $2.4 billion after a review of the brand's prospects in January. Although Ford said it had no plans to sell Volvo, which it bought in 1991, it has been holding informal talks with interested parties, according to people who were briefed on the matter late last month and did not want to be identified before a public announcement世界论坛网 http://www.wforum.com/gbindex.html

Cai Wei, vice president of Dongfeng Motor Group, China's third-largest automaker and mentioned by one of those people as a potential buyer for Volvo, said the matter had never been discussed by Dongfeng's management.世界论坛网 http://www.wforum.com/gbindex.html

"We are always open to all kinds of possibilities, but that does not mean we will jump at every available opportunity," Cai said.世界论坛网 http://www.wforum.com/gbindex.html

Nanjing Auto, another Chinese automaker, raised its profile when it bought the MG brand from MG Rover. But SAIC Motor, China's largest carmaker, which recently acquired Nanjing Auto, has shown no appetite for taking on additional brands.世界论坛网 http://www.wforum.com/gbindex.html

A spokeswoman for SAIC, also a China partner for GM and Volkswagen, said the company was busy with its own brands and joint venture brands. FAW Group, the second-largest Chinese automaker as well as Toyota Motor's and Volkswagen's partner in China, has not been named as a potential buyer of the U.S. carmaker stakes.世界论坛网 http://www.wforum.com/gbindex.html

Speculation about prospective Chinese interest in U.S. auto assets has been fanned by China's huge appetite for global assets. This could be a good opportunity for Chinese automakers to buy into Detroit giants in dire need of cash injections as their shares trade at multiyear lows, some analysts say, although major stakes would be out of the question for political reasons.世界论坛网 http://www.wforum.com/gbindex.html

But with oil prices at record highs and U.S. auto sales at 15-year lows, analysts and Chinese industry executives see little benefit from purchasing small equity stakes. "Most Chinese carmakers are already making foreign auto brands in partnership with global partners," said Zhang Xin of Guotai Junan Securities. "A stake in GM will not help them sell the models in U.S. market."世界论坛网 http://www.wforum.com/gbindex.html