• Sweden edition
 

'Chinese firms too small for Volvo takeover'

Published: 29 Mar 2009 11:20 GMT+02:00
Updated: 29 Mar 2009 11:20 GMT+02:00

Despite their global ambitions, Chinese automakers are still not big enough to take over their troubled foreign rivals, analysts and company officials said.

Reports have swirled for weeks on persistent rumours that Chinese automakers are eyeing the chance to buy Sweden's Volvo from US giant Ford Motor Co. or to take either Swedish unit Saab or American all-terrain vehicle-maker Hummer off the hands of General Motors.

The companies at the centre of the rumours, such as Geely, one of China's largest private automakers, have repeatedly denied the reports while at the same time fanning the rumours by saying they are open to foreign acquisitions.

Such acquisitions are a route through which Geely could access capital, new markets and international partnerships, according to the car company's website.

Analysts, however, said they do not expect to see any startling Chinese auto acquisitions in the near future.

"Compared with more than 40 billion yuan (5.8 billion dollars) needed to acquire Volvo, (Geely's) market value is only about three billion yuan," consultancy Roland Berger said in a research note.

"The total assets of Chery Automobile are about 30 billion yuan, with capital of three to four billion yuan and the acquisition requires about 40 billion yuan," the firm said, listing the Chinese automakers that would be most likely to bid.

The market value of Chang'an Auto is only about 8.5 billion yuan, it added.

"I do not see any kind of possibility that a local company would acquire Volvo or Hummer. It is not realistic financially or even in terms of management capability," said John Zeng, a Beijing-based analyst with Global Insight.

"For a number of Chinese companies, their sole experience with foreigners is their joint ventures in China. They have never operated overseas," he said.

One exception - and one that has turned out badly - is SAIC's acquisition in 2004 of small South Korean automaker Ssangyong, which now faces bankruptcy.

Jia Xinguang, an analyst with the China Automotive Industry Consulting and Development Corporation, agrees Chinese companies lack the necessary management experience.

"The complicated relationship between trade unions and employers in foreign companies is another problem for them," he added.

But size is the main obstacle.

"Any overseas acquisition needs National Development and Reform Commission approval and at his time the NDRC has concerns about Chinese companies' capacity to run such acquisitions," said John Shen, an analyst for Roland Berger.

Late last month Chen Bin, the head of the commission, effectively warned Chinese automakers they were not yet ready to rub shoulders with international players but at the same time told them "all options were open."

Last week, Beijing once again urged China's crowded domestic auto sector to consolidate.

But the international opportunities remain attractive as a means to acquire the technology that the Chinese automakers need.

"They do not have strong brand technology and are still relying heavily on foreign partners. Over 60 percent of vehicle production comes from joint ventures including more than 85 percent of passenger cars," Global Insight's Zeng said.

"One more realistic way to go would be to go for some core assets which they need, rather than buy the whole company," Roland Berger's Shen said.

That could make more sense at a time when several Chinese companies, notably SAIC, FAW and DongFeng Motor Corp, want to establish their own brands.

It is a path Geely seems to have taken with its acquisition on Friday of Australian auto parts manufacturer Drivetran Systems.

Geely said the deal would improve its capability to develop and produce gearboxes, or transmission - a key technology that Chinese automakers must learn to master to be globally competitive.

The fact that Chinese automakers crave the global spotlight may mean they enjoy the attention the rumours over foreign acquisitions bring, Shen said.

"A lot of companies are taking advantage of it to promote their brand so they are not taking active measures to clarify the rumours," he added.

AFP/The Local (news@thelocal.se)

Don't miss...X
Left Right
Today's headlines
Snake hunt after man claims playground bite
The Swedish adder. Photo: Piet Spaans

Snake hunt after man claims playground bite

A man claimed to have been bitten by a poisonous snake at a paddling pool in Gothenburg on Thursday prompting a hunt which ended without a trace of the offending reptile. READ  

Stockholmers sound off on 'beautiful Swedes'
Swedish girls in Stockholm. Photo: Susanne Walström/Imagebank Sweden

Stockholmers sound off on 'beautiful Swedes'

Following a Nordic survey in which Swedes were voted the "most attractive", The Local hit the streets to see what Stockholmers thought. READ  

Sweden keeps eye on Norway bomb threat
Norwegian police car at Oslo Gardemoen Airport. Photo: TT

Sweden keeps eye on Norway bomb threat

The Swedish Security Service (Säpo) have said that an "imminent terror threat" to neighbouring Norway doesn't yet affect Sweden although developments are being closely followed. READ  

Seven-year-old Swede cycles to Berlin
The Blomdahl family in Berlin. Photo: Private

Seven-year-old Swede cycles to Berlin

Edvin Blomdahl is seven-years-old. He also cycled from Sweden to Berlin, a journey of 370 kilometres, in four days. READ  

Opinion
'Gaza conflict needs help, not empty rhetoric'
Demonstrations at Sergels Torg in Stockholm. Photo: Kent Vilhelmsson

'Gaza conflict needs help, not empty rhetoric'

As the rhetoric rises at demonstrations in Swedish cities, Stockholm-based Israeli writer David Stavrou calls on Swedes to think before they shout and to cast a critical eye over much that is written and said about the conflict in Gaza. READ  

Brit's charity tractor trek heads for Sweden
The vintage tractor ready to travel from UK to north Norway. Photo: Peter Matheson

Brit's charity tractor trek heads for Sweden

A British man is set next month to drive from Scotland, across Sweden, and to the northern tip of Norway on a vintage tractor to raise money for a cancer charity. READ  

Sweden agency hikes heat warning to 'extreme'
This canine friend is not amused. Photo: TT

Sweden agency hikes heat warning to 'extreme'

Swedish weather agency SMHI has raised its weather warning to class 2, giving notice of "extremely high temperatures" in parts of the country. READ  

Songs for a hot Swedish summer
Ted Gärdestad. Photo: TT

Songs for a hot Swedish summer

Contributor Paul Connolly has put together a list of Swedish songs to capture balmy summer days, which in his neck of the northern woods are pushing the mercury above 35c for the first time in a century. READ  

Swedes suffer as buses boil in the summer sun
Photo: TT

Swedes suffer as buses boil in the summer sun

Stockholm's local traffic authority has received almost 300 complaints since June 1st with many regarding stifling heat on the city's buses, which lack air con. READ  

Grounded flights strand Swedes in Tel Aviv
Photo: Matt Rourke/TT

Grounded flights strand Swedes in Tel Aviv

UPDATE: About 270 passengers planning to fly to Stockholm are still stranded in Tel Aviv, and airlines have stated that flights will likely be grounded on Thursday as well. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Society
Swedes voted 'most beautiful' in the Nordics
Business & Money
Sweden demands EU clarity on Bitcoin tax
National
Swedish organic sales enjoy 'amazing' growth
Photo: Johan Nilsson/TT
Society
What's On in Sweden
Gallery
People-watching July 23
Blog updates

22 July

Det (The Swedish Teacher) »

"Hej! “Det” is a personal pronoun that can be used in many ways, and it might me confusing if you always translate “det” to English “it”. In this article I will do my best to guide you to how to use “det”. Det replacing a word, a phrase or a clause Let us begin with the less confusing..." READ »

 

22 July

PROTECTING GIRLS FROM ABUSE OF THEIR RIGHTS (The Diplomatic Dispatch) »

"Today (22 July) my Prime Minister, David Cameron, and UNICEF, are hosting the world’s first #GirlSummit in London. The Summit’s aim is to mobilise domestic and international efforts to end the appalling practices of Female Genital Mutilation (FGM) and Child Early Forced Marriage (CEFM). This is a high priority for the UK government and the Prime..." READ »

 
 
 
National
Swedish cops elect not to shoot 'angry elks'
Business & Money
New alcohol retail rules threaten micro-breweries
Gallery
People-watching Båstad
Business & Money
Sweden falls to third in global innovation index
Society
Swedish ornithologists keep webcam watch
Photo: Andreas Nordström/Image Bank Sweden
Gallery
Top ten Swedish beach hot spots
Tech
Swedish Wiki vet sets new content record
Photo: Fastighetsbyrån
Lifestyle
In Pictures: The Local's Property of the Week
Photo: Finest.se
Gallery
People-watching July 15-16
Photo: Ola Ericson/Image Bank Sweden
Society
What's On in Sweden
Photo: Lisa Mikulski
National
Hope springs eternal for expat pet shop owner
Gallery
Princess Estelle steals limelight at mum's birthday
National
Swedes risk infants' lives by covering up prams
National
Swede runs for office just using Bitcoin funds
Gallery
People-watching July 11-13
National
Malmö mayor slams Danish beggar ban
National
Swedish anti-abortion midwife sues county
National
Swede's salary chopped for Facebook use
Sponsored Article
Introducing... Your finances in Stockholm
Sponsored Article
Introducing... Housing in Stockholm
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

710
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com
If you want to drink, that’s your business.
If you want to stop, we can help.

Learn more about English-language Alcoholics Anonymous in Sweden. No dues. No fees. Confidentiality assured.
AA-EUROPE.ORG/SWEDEN
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
http://psdmedia.se