SAIC buys 10pc Daewoo stake
biz.scmp.com
Monday, October 14, 2002
SAIC buys 10pc Daewoo stake
BILL SAVADOVE and BLOOMBERG and REUTERS in Shanghai
Shanghai Automotive Industry Corp (SAIC) has become the first mainland carmaker to expand abroad after buying a 10 per cent stake in a joint venture formed from South Korea's ailing Daewoo Motor.
China's second-biggest vehicle maker said yesterday it would spend US$59.7 million on a 10 per cent stake in GM Daewoo Auto and Technology that will own three of the bankrupt Korean firm's production plants.
"Our participation in GM Daewoo is part of our 'Go Abroad' strategy," Shanghai Auto president Hu Maoyuan said. "Daewoo's cars are sold all over the world and we want to learn from their experience."
The investment "will enable SAIC's capital, product, management and human resources to all become integrated into the global marketplace", Mr Hu said.
United States vehicle giant General Motors bought assets of Daewoo Motor after the collapse of its parent.
The partnership should help a restructured Daewoo enter China's domestic market - its strength in sub-compact cars complementing the Buick sedans and family cars that GM and Shanghai Auto roll out at a Shanghai joint-venture plant.
Shanghai Auto ranks as the junior member of the venture, with GM holding 42.1 per cent, Japan's Suzuki 14.9 per cent and Daewoo creditors 33 per cent. It will be given one of 10 board seats.
Mr Hu said Shanghai Auto hoped the investment would help provide an export market for its car parts, while GM officials said GM Daewoo could gain a springboard into the mainland market.
Analysts said the investment was unlikely to yield quick returns but would give Shanghai Auto experience in overseas markets.
"This is a very meaningful step by Shanghai Auto to go abroad," said Zhang Yu, who monitors China's car industry at Automotive Resources Asia in Beijing. "The investment will bring benefits in the long run."
Daewoo's imported cars are popular in China because of their relatively low price, but to expand in the increasingly competitive market, foreign carmakers need domestic operations to take advantage of lower production costs.
Daewoo poured more than US$900 million into an engine plant and components factory in Shandong province. The initial aim was to export to Korea, but the two plants have stood idle due to the Daewoo Group's financial problems.
Some analysts had speculated that GM Daewoo would take over the plants and expand them into a full car production facility, but GM said yesterday the assets were not part of the joint venture.
"The reason we excluded them from the Daewoo deal was that we didn't feel at the time that they were assets that could add value," said GM China chairman and chief executive Philip Murtaugh, adding the US firm was "working hard to determine the best approach in China".
The two companies were also in talks to set up a venture to provide customers with car loans, Mr Hu said. Under rules issued last week by China's central bank, finance companies such as that run by GM can grant yuan-denominated car loans.
"China is seeing an increasing trend of customers financing their purchases through car loans, and we are interested in making use of this trend," Mr Hu said. "We are in talks with General Motors to see how we can better co-operate in this business." He declined to give more details.
Shanghai Auto is also in talks to take over two smaller carmakers, one in Shandong and the other in Anhui province.
"We are in talks to raise our stake in SAIC Chery Automobile as well as buy shares of Yantai Body, and play a more active role in consolidating China's automobile industry," Mr Hu said adding that GM might also take part in the partnership.
Shanghai Auto earned 7.3 billion yuan (about HK$6.84 billion) in profits last year.
The company is aiming to expand production to one million cars by 2007, half of which will carry its own brand, according to its press statement. |
