Carmakers' asset sales draw bids from China

These days, whenever struggling or cash-strapped automakers put assets up for sale, Chinese firms turn up at the auctions.

Over the past year, Chinese bidders have surfaced in just about every major deal. Analysts say China's fledgling carmakers need to upgrade their capabilities to keep pace with the growth of their market.

China is the world's No. 1 vehicle market now, but its manufacturers lag the global players in quality and in technology.

Analysts say Chinese automakers are increasingly seeking to buy assets outright to bolster their capabilities because they haven't obtained the know-how and technology they expected from their joint ventures with international automakers.

Last year, Chinese firms submitted offers for General Motors Co.'s German subsidiary Adam Opel GmbH and for both of the Swedish carmakers put up for sale by Detroit's cash-strapped automakers -- Ford Motor Co.'s Volvo Car Corp. and GM's Saab.

Zhejiang Geely Holding Group Co. Ltd., the privately owned parent of Geely Auto, is on track to conclude a definitive agreement to buy Volvo during this quarter.

Today is GM's deadline for bids for Saab. Dutch sports car maker Spyker Cars is expected to submit a fresh proposal. The U.S. automaker rebuffed a bid from Beijing Automotive Industry Corp. (BAIC) for all of Saab, but it agreed to sell BAIC the tooling for the outgoing Saab 9-5 model.

"BAIC has been in the hunt for a car to call its own since 1983," when it formed the first venture in China with a foreign carmaker, said Michael Dunne, president of Dunne & Co. in Hong Kong.

BAIC's venture with then-Chrysler Corp. was followed by a slew of partnerships between Chinese and global carmakers. It was the only way foreign companies were allowed to build cars in China.

But the American and European venture partners were reluctant to share technology and car-making expertise with the Chinese, whom they viewed as future rivals. The Chinese partners were frustrated that they weren't getting the knowledge they wanted but were placated by the rich profits generated by the ventures, said Dunne, who is working on a book on the Chinese auto industry and its ambitions.

Starting with Shanghai Automotive Industry Corp. (SAIC), which is a venture partner of GM and Germany's Volkswagen, the Chinese started to take their profits from the ventures to purchase car-making assets.

Five years ago, SAIC bought blueprints and tooling to produce cars from the failing British Rover Group and developed its own Roewe brand cars. The business is tiny compared with the sales at SAIC's joint ventures.

But, Dunne said, "I see BAIC coming to the same conclusion. The parent companies want to take charge and treat the joint ventures as money-makers to fund their own programs."

Dunne estimates BAIC's 2009 sales totaled 1.065 million cars and trucks, including 550,000 cars built in a venture with Hyundai Motor Co.

Sweden's carmakers haven't been independent in many years. GM bought half of Saab in 1990, and Ford bought Volvo in 1999.

The prospect of being sold to Chinese owners is unsettling for many Swedes, but analysts say more such deals are likely to take place.

"You're seeing the center of gravity move toward big emerging markets with huge populations," said Jack Nerad, editorial director of Kelley Blue Book.

Chinese carmakers will benefit from owning brands such as Volvo and Saab, he said. "Those are fairly well-known brands. They have global footprints."

India's Tata Motors Ltd. previously acquired Ford's upscale Jaguar and Land Rover brands. In recent years, all of Britain's major carmakers have come under foreign ownership.

"It's part of the global reality of what our industry has become," said Michael Robinet, vice president of global forecasting at Northville-based CSM Worldwide.

"Twenty or 25 years ago, it was a much more regional industry," he said. "In today's reality, you have to be globally competitive and that's what's pressuring countries like Sweden and the U.K., with their high cost bases. This pressure will not abate."