As the global financial crisis worsens, General Motors and Chrysler are at risk of global failure. Whoever came to the market, before the Japanese Toyota calls for high, at the same time, some Chinese equipment manufacturing companies have also played an idea.
On November 15, Zhang Xiangmu, director of the Department of Equipment Industry of the Ministry of Industry and Information Technology, revealed to reporters that domestic large-scale equipment companies such as SAIC and Dongqi intend to take over some assets.
Luo Jun, secretary-general of the Asian Manufacturing Industry Association, also pointed out that the financial crisis has forced China's equipment manufacturing industry to upgrade. It is inevitable that a large number of low-value-added enterprises will be eliminated in the industry reshuffle. After this round of reshuffling, the domestic equipment manufacturing industry will have a number of companies with strong independent innovation capabilities and strong capital strength. When there are problems in manufacturing companies in Europe and the United States, there is less resistance for Chinese companies to conduct cross-border mergers and acquisitions. In the next year or two, a succession of Chinese equipment manufacturing companies may succeed in international mergers and acquisitions.
“In the M&A path, Chinese companies can start with M&A and general-purpose supporting industries and joint venture companies in China,†said Jin Jian, executive director of business development at Deloitte & Touche in China.
Industry reshuffle
According to a set of data from the Ministry of Industry and Information Technology, China's equipment manufacturing industry is in serious danger of recession.
"China's equipment manufacturing industry is facing severe challenges." Zhang Xiangmu pointed out at the "China Manufacturing Industry Forum 2008 Annual Meeting" recently held.
According to the data from the Department of Equipment and Industry of the Ministry of Industry and Information Technology, from January to September, the increase in the value added of the industrial machinery industry fell by 4.2 percentage points year-on-year, and some products even experienced negative growth. The increase in the total industrial output value of the automotive industry has dropped by 14 percentage points year-on-year, and vehicle exports have fallen both year-on-year and on a quarter-on-half basis.
The growth rate of China's industrial output value has been declining for four consecutive months. In October, the increase in value added of industrial enterprises above designated size fell sharply from 16% in June to 8.2%, the lowest since 2002.
“The subsequent orders for the equipment manufacturing industry have dropped sharply and are facing a serious downward trend.†Zhang Xiangmu said. It is reported that in recent months, with the intensification of the international financial crisis, new orders for machine tools, power generation equipment, and heavy machinery have dropped sharply.
For example, in the above power group, the domestic thermal power equipment orders produced in September were only 6% of the same period of last year; entering the “stagnation†state of the ship market in October, the orders for new ships to undertake that month were less than 10% of the average monthly orders for this year, even There was a withdrawal.
At the same time, the capital chain of enterprises has become tight, which has become a direct cause of the collapse of some enterprises. Due to the shrinking of market demand, a large backlog of finished products of enterprises, accounts receivable increased, and capital turnover was difficult. At the same time, as the equipment manufacturing industry is currently facing the dual pressure of falling product prices and digesting high-priced inventory materials, corporate profits have generally declined.
"Overall, China's equipment manufacturing industry is affected by the economic situation at home and abroad. The impact is unprecedented." Zhang Xiangmu told reporters.
At the same time, the historical accumulation of China's equipment industry may be a strong support for the industry to face multiple pressures.
In recent years, China's equipment industry has witnessed rapid development. Its growth is deeper than that of manufacturing, and it has become the main driving force for the rapid economic growth of the country. In 2007, the total output value of China's equipment manufacturing industry reached 11.94 trillion yuan, accounting for 33.77% of the total output value of the manufacturing industry, surpassing Japan and Germany, and ranking second in the world.
“The harsh environment has already formed a forceful mechanism for industrial upgrading in China's manufacturing industry,†said Luo Jun, secretary general of the Asia Manufacturing Industry Association. A large number of low-value-added companies are eliminated in the industry reshuffling and it is inevitable that China’s manufacturing industry There will be a group of companies with strong independent innovation capabilities and strong financial strength.
Industrial upgrading and transfer
“While the equipment manufacturing industry is facing the danger of recession, the financial crisis and the relocation of the global manufacturing industry will promote the upgrading of China’s equipment manufacturing industry.†Jin Jian believes that “the financial crisis is an upgrade of China’s equipment manufacturing industry. Product replacement opportunities."
“The trend of large-scale industrial transfer has come. Some large investment groups have already found a safe haven for China,†said Jin Jian. “Some of Deloitte's clients who originally engaged in financial investment are now investigating their investment strength in China, and many of them are equipped. Manufacturing industry. They are looking at the steady growth of profit opportunities in the manufacturing industry."
These enterprises that are now ready to be transferred are different from the initial stages of reform and opening up. They are mostly industries with relatively high levels of processing technology. International capital is willing to shift these industries from developed countries to bases like China. “Industry is quietly shifting,†Jin Jian said. Ford Motor Co., for example, is now in danger of bankruptcy. It proposes to transfer their original processing industries or allow Chinese companies to provide supporting services.
Kim Young-soo, general manager of LG Electronics and General Manager of China, also believes that for the Chinese manufacturing industry, the financial crisis is both "dangerous" and "dangerous": the deterioration of the economic environment, the decline in purchasing power, and the manufacturing of less competitive Industry companies will bring great difficulties and pressures for survival; at the same time, they will also be “opportunity†and “opportunityâ€, because the manufacturing industry will be relatively less affected than financial and investment industries, and competitive manufacturing companies will have Relatively wider space for development, in such a turbulent economic environment, it is the favorable situation of the appreciation of the renminbi, the introduction of world advanced technology, the formation of independent core competitiveness, the completion of industrial upgrading, bigger and stronger "golden opportunity."
Overseas M&A opportunities
As we all know, since the formation of the US subprime mortgage crisis, the automobile has become one of the industries that have been hit hardest.
GM lost a total of $4.2 billion in the third quarter and spent a total of $6.9 billion in cash. Today, it has only $16.2 billion in cash flow. Ford lost $2.98 billion in operating expenses in the quarter, and spent $7.7 billion in cash, close to 30% of its total cash. In addition, Chrysler is also accelerating the consumption of cash, and said that if there is no new financial aid or can not achieve restructuring, with the existing cash level, Chrysler's operations will not survive the first half of 2009.
U.S. General Motors Corp., which was in a crisis of operations, wanted Japan Toyota Motor Corporation to invest in the purchase of some of its assets to alleviate the serious shortage of funds. However, Toyota management is currently cautious about the acquisition.
In the face of GM's helplessness and Toyota's ambiguity, China's equipment manufacturing companies seem to have an opportunity to insert a foot.
“At present, the US automobile manufacturing industry is in a very difficult position. This is precisely the timing for China’s capital to “bottom down†the US automobile manufacturing industry.†Experts from the China Association of Automobile Manufacturers stated that “Changfeng Motor has announced its participation in the bid for GM. A precedent for the Hummer brand."
Chen Jiagui, deputy president of the Chinese Academy of Social Sciences and president of the Asian Manufacturing Association, also believes that the overall production of plants manufactured by American-made plants is "a far-fetched dream for Chinese companies." Under the circumstances of the lack of global operation capabilities and experience of Chinese companies, it may be possible to “kill a sick horse as a dead horse.â€
While the global auto industry is faltering, GM continues to achieve significant growth. According to Ms. Margaret, the head of GM’s China marketing department, compared with the same period of last year, the sales of GM’s five branded cars in China increased by more than 10%. Ms. Margaret believes that GM has developed very well in the Chinese market and that China's huge market potential can fully satisfy the independent development of the Shanghai GM and Opel brands. GM’s Opel brand director Chen Wenxin introduced that at present, GM has built Chevrolet and Buick as the mainstream low-end, Opel, Saab, and Cadillac as niche high-end product development matrix.
In addition, according to data from the China Association of Automobile Manufacturers, Shanghai GM sold 324,400 units in the first three quarters, slightly lower than the 308,800 units sold in the same period last year. It was the second-lowest sales volume among FAW-Volkswagen and Shanghai Volkswagen.
Jin Jian pointed out that it is possible to begin with mergers and acquisitions of GM's joint venture companies or supporting industries in China. The GM is also unwilling to go bankrupt. Selling some assets for liquidity is a realistic consideration. Judging from the capabilities of China's equipment manufacturing industry, starting with the acquisition of some assets, the acquisition of a joint venture factory in China is a realistic choice. Select a holistic and comprehensive merger, because the risk of integration will increase. From the perspective of existing cases, there is also little success.
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