July 14, 2008 / 9:47 AM / 11 years ago

DEALTALK-China automakers no white knights for U.S. giants

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By Fang Yan

SHANGHAI, July 14 (Reuters) - China’s fledgling car makers see little to gain from buying assets or equity stakes in General Motors (GM.N) and Ford (F.N), dismissing speculation they could be white knights for the faltering U.S. giants.

At first glance, it appears an appealing match.

Chinese automakers are eager to enter the North American market, the world’s largest, and the woes at General Motors Corp and Ford Motor Co are deepening. GM shares are at a 54-year low, and Ford was forced by slumping sales to abandon its profit goal for 2009.

But Chinese automakers, from top player SAIC Motor Corp (600104.SS) to up-and-coming Chery Automobile Co, responded coolly when GM shopped around its gas-guzzling Hummer SUV unit and Ford reviewed the prospects for Swedish premium brand, Volvo.

“We haven’t had any discussions at the management level to consider either Volvo or Hummer,” said Jin Yibo, a spokesman for Chery, a fast-growing maker of inexpensive cars.

“We are moving gradually to enter the higher-end segment ourselves. We are also talking with Fiat and others about making premium models,” said Jin.

Chery, which made its name with the QQ, China’s best-selling sub-compact car, has already signed an agreement for a joint venture with Italy’s Fiat SpA FIA.MI to make Alfa Romeos.

Chery was seen as a potential contender for Volvo due in part to its similarity to India’s Tata Motor (TAMO.BO), the maker of the Nano, the world’s cheapest car. Tata completed the $2.3 billion purchase of the Jaguar and Land Rover brands from Ford last month.

But just as analysts doubted whether Tata could succeed with those premium brands where Ford failed, many also question if Chinese automakers could engineer a turnaround at Volvo or Hummer. Limited international exposure, and lack of technical and managerial savvy could weigh against Chery and other Chinese automakers, some analysts argue.

“Volvo and Hummer are still seen by many as solid and prestigious brands even though they are not making much money. But will that perception still hold if they are China-made?” asked Matthew Kong, associate director in Fitch’s Asia-Pacific corporates team.


Ford, wrote down the value of the unit by $2.4 billion following a review of the money-losing brand’s prospects in January. Although the No.2 U.S. automaker said it had no plans to sell Volvo, which it bought in 1991, it has been holding informal talks with interested parties, according to sources briefed on the matter.

Cai Wei, vice president of Dongfeng Motor Group (0489.HK), China’s third-largest automaker and mentioned by one of those sources as a potential buyer for Volvo, moved to quash market speculation, saying the matter had never been discussed by Dongfeng’s management.

“We are always open to all kinds of possibilities, but that does not mean we will jump at every available opportunity,” he said.

China’s Nanjing Auto raised eyebrows in the industry when it bought the British MG brand from failed MG Rover, but SAIC Motor, China’s largest carmaker and which recently acquired Nanjing Auto, has shown no appetite for taking on additional brands.

A spokeswoman for SAIC, also a China partner for GM and Volkswagen (VOWG.DE), said the company had its hands full with its own brands of cars and its joint venture brands.

Speculation about prospective Chinese interest in U.S. auto assets has been fanned by the growing strength of the world’s fourth-largest economy and China Inc’s voracious appetite for global assets, from oil fields and iron mines to stakes in financial powerhouses such as Morgan Stanley (MS.N).

This could be a good opportunity for Chinese automakers to buy into Detroit giants in dire need of a cash injection, with their shares at multi-year lows, some analysts said, although a major stake would be out of the question for political reasons.

But with oil prices hitting record highs and U.S. auto sales at 15-year lows, analysts and Chinese industry executives saw little benefit from purchasing small equity stakes.

“Most Chinese car makers are already making foreign auto brands in partnership with global partners. A stake in GM will not help them sell the models in U.S. market,” said Zhang Xin, a senior industry analyst with Guotai Junan Securities. ($1=6.846 Yuan) (Editing by Lincoln Feast)

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