China can be savior of global auto industry?

Shanghai, May 27 (Gasgoo.com) Beijing Automotive Industry Corp (BAIC) is the latest Chinese automaker jumping on the bandwagon of overseas acquisitions, as Germany's economy ministry has confirmed the Chinese firm's offer for Opel, a move which presents a fiercely contested four-way battle for control of GM's German unit.

BAIC can be added to a string of Chinese automakers reported to be interested in buying international assets in an industry undergoing a major overhaul as sales are recession and tight credit. But executives and analysts don't think the Chinese firms are able to act as the savior of the global auto industry, according to Reuters.

Media reports, mostly unconfirmed, have mentioned Geely Auto and Chongqing Changan Auto, as potential bidders for Ford Motor's Volvo cars, and Geely for GM's Saab. Dongfeng Motor and Chery Auto have also been reported to be interested buyers in overseas assets.

"It doesn't make sense for them to take over the entire operations, which is of little value for them. We had enough production capacity in China already," said Qin Xuwen, an analyst with Orient Securities in Shanghai. "What we do need is brand and technology."

An executive from one of the major automakers has echoed this sentiment, saying "Chinese automakers are indeed interested in the foreign brands out there for sale, but few would want to take over the entire operations."

Other executives agreed that what Chinese automakers need most is the brand, technology or select platforms to be used for raising their own profile in the industry and market, but running an overseas business is quite another matter.

Accordingly, Chinese companies are more likely to pursue deals like SAIC Motor's purchase of the Rover 750 and 250 platforms from failed MG Rover in 2005. That deal enabled SAIC to develop the Roewe, its first in-house designed saloon, without the baggage of inefficient manufacturing.

While the BAIC offer is likely to stir up the ongoing Opel auction, it remains in question just how serious BAIC is about owning and operating the business.

China's automakers are powerhouses at home, but have little experience selling their cars overseas and even less turning around ailing auto assets in other countries.

The recent bankruptcy of Ssangyong Motor, a struggling South Korean automaker owned by China's SAIC, is a textbook case of an ailing auto asset the Chinese auto giant bought for a bargain only to get burned.

It's not just a case of buying it and hanging on. You have to consider unions, politics, communities there, another industry analyst said.