Caution urged in bids for US Big Three

• Source: Ce.cn
• [08:34 July 21 2009]
• Comments

Then Beijing Automobile Industry Corp (BAIC) announced a last-minute offer for GM's Opel business in Europe, although GM now is in talks with other potential buyers, Canadian auto parts company Magna and Belgian financial investor RHJ International.

A number of Chinese companies, including Geely and Dongfeng, are on the potential buyer list for brands such as Volvo and Saab.

However, unlike the positive responses to purchases such as China's Lenovo acquiring IBM's PC business in 2004, bidding for assets from ailing Big Three automakers has attracted more criticism.

"I cannot think of any reason for Chinese automakers to buy waning foreign brands, although I admit that BAIC has reinforced its capability through a series of domestic expansions in recent years," said Cheng Yuan, a senior auto industry columnist with Economic Daily.

"Do they (Chinese automakers) need to buy production lines to boost capacity? Can they maintain the brand value after the handover? And how can they reduce the costs if they manufacture overseas?" asked Cheng.

Dong Jianhua, an auto industry analyst with Southwest Securities, expressed caution, too.

"It's very risky for Chinese automakers to acquire US auto assets and brands now," Dong said.

"The acquisitions might plunge Chinese firms into hot water, since they could be beset with financial and management problems in the future," Dong said.

Hui Yumei, an analyst with auto consulting firm Sinotrust, agreed.

"The US auto giants are only divesting their burdens, not the profitable and competitive units. Chinese enterprises should be prudent," Hui said.