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China carmakers see little value in GM or Ford assets

Beijing, 160708. 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.

At first glance, it appears to be an appealing match.

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.

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.

"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.

"We are moving gradually to enter the higher-end segment ourselves. We are also talking with Fiat and others about making premium models."

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.

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.

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.

"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?"

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

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.

"We are always open to all kinds of possibilities, but that does not mean we will jump at every available opportunity," Cai said.

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.

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.

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.

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."

Source: IHT.com.