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Merge and restructure are not conditioned

Shingo From GAS| February 14 , 2007 08:48 BJT

Li Xianjun, director of the Automobile Industry R & D Center of Qinghua University

It is predicted that China will bring big groups who have the capacity to merge and restructure in auto industry after 20 yearsaccording to the market performance. The development of self-owned brand enterprises accord with the evolution regulation of the world automobile industry, and the self owned brands are most likely to develop to big groups.

Li Xianjun denied a national merging and restructure in auto industry at current stage.  He believes this is beyond the current stage of development of China's auto industry, and in violation of the law of auto industry development.

Li Xianjun said that the West countries began large-scale reorganization since the 1990s, such as Mercedes and Chrysler; Mazda and Ford, this kind of reorganization is on the basis of their advanced capabilities and the ability to integrate.

Take Ford as an example, it was founded in 1903, achieving an annual output of one million vehicles in 1915. But until 80's last century, Ford hadn't begun large-scale joint reorganization, like the acquisition of Puma, Mazda, and Volvo. In the past 80 years, only in 1922, Ford bought Lincoln. It could be said that before a large-scale reorganization, Ford used dozens of years to advance its competitiveness and develop the ability of integration.

Theoretically speaking, the acquisition and reorganization always take the big core group as the parent company and core groups should have three major platforms-R & D platform, management platform and cultural platform, as well as three modes-operation mode, management mode and cultural mode. The "two threes" is the core ability of integration for a group, and also a necessary condition and basic measure for a successful reorganization. And currently the Chinese auto enterprises still have not these conditions and capacity, that is to say China's auto industry has not developed to this stage yet.

In addition, the reorganization is a natural result of development in the market, rather than relying on administrative engagement by the government.

In practice, the majority of Chinese auto groups worked out merger and reorganization by capital operation, which makes the fundamental reason for the collapse of their light trucks, passenger subsidiaries. For example, since the beginning of the 1980s, eight domestic light vehicles enterprises was merged or bought by FAW Group. However, since FAW were not able to set up the above "three platforms" and "three models,", now there are only two left. Therefore, it is against a realistic approach to encourage reorganization beyond the industrial development stage. (To be continued)


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