this is how legacies are fritted away by some and inherited by others, as Halliburton becomes dubai-n, and MG becomes Chinese iht.com
MG's revival reflects China's new assertiveness
By Craig S. Smith
Monday, March 12, 2007
LONGBRIDGE, England: China gets its first convertible sports car this month when a recently interred British automotive genre rises from the dead as a Chinese incarnation.
Nanjing Automobile is about to begin producing MGs.
The planned revival of the British sports car is the latest and most splashy example of how China's growing economic might is carefully reaching into foreign markets, buying troubled companies with established brands and using them to build bridgeheads for the billions of dollars that the country has to invest overseas.
"Within a very small period of time you will see a lot of industries following the same strategy," said Wang Hongbiao, chairman of Nanjing Automobile in Britain. [EDIT by J: backed by USD 200 billion investment fund + annual uptake of another USD 200 billion donated by spendthrift legacy destroyers]
It is a cautious, even stealthlike approach, and a stark contrast to the paths taken by Japan and South Korea, which spent billions of dollars over decades to build recognized brands through exports before establishing a high-profile corporate presence overseas.
Still, China is in a hurry, and as it opens the floodgates for outward investment, many of its companies hope to leapfrog the start-up process by acquiring technology and distribution networks together with well-known names on which to build larger businesses.
Though private companies have been leading the way, the investment agency that China is setting up to diversify its $1.1 trillion in foreign exchange holdings, could provide another boost, particularly as Beijing sees the entire world as its stage for potentially hundreds of billions of dollars in acquisitions.
It began in 2002 when TCL, a Chinese maker of televisions and mobile phones, bought the German company Schneider Electronics. The Chinese computer maker Lenovo acquired IBM's personal computer business in 2004.
Qianjiang Group, the largest Chinese motorcycle manufacturer, now owns Benelli, the oldest motorcycle maker in Italy. Shenyang Machine Tool Group has bought Schiess, a longtime maker of German machine tools. Xinjiang Chalkis even owns a French tomato cannery and sells Chinese tomato sauce in Provence.
All of those acquired companies were facing financial problems. Many of China's foreign purchases have been focused on energy resources, dominated by big state-owned enterprises like PetroChina and Cnooc, which have spent billions in recent years acquiring oil and a natural gas fields. Those deals have helped swell the value of China's outbound acquisitions from $18.6 million in 1990 to nearly $14 billion on more than 100 deals last year, according to Thomson Financial, which tracks global investment trends.
China's experience of acquiring high-profile natural resources, and the political backlash that has foiled some of those attempts, have made a cautious entry with smaller Chinese companies all the more important.
"Even five years ago, it would have been difficult to get approval for this kind of stuff," said Jonathan Anderson, chief economist for Asia at UBS in Hong Kong. "But now the government is clearly giving companies a mandate to go out and make acquisitions."
To encourage outbound investment. the Ministry of Commerce now accepts applications online and the State Administration of Foreign Exchange has abolished quotas on the purchase of foreign exchange for such deals. These changes have led to a sharp increase in overseas deals all over the world.
Wanxiang Group, the biggest Chinese maker of drive shafts, shock absorbers and other car components, bought Schiller, Universal Automotive Industries and Rockford Powertrain to get into the U.S. market with established American auto-parts brands.
Samson Holdings, a Taiwan-owned, mainland-based furniture maker, has done the same by buying Universal Furniture, Legacy Classic and Craftmaster Furniture.
In 2004, Shanghai Automotive Industry Corp. took a controlling stake in SsangYong Motor, the fourth-largest automaker in South Korea, for access to that market. And Xinhua Financial Network, an offshoot of China's official press agency, bought AFX Asia from Agence France-Presse, gaining 12 news bureaus across Asia. Nanjing Auto paid just over $100 million for the MG assets two years ago.
Still, the acquisitions are but a trickle at this stage. "This is not Japan in the '80s — this is Japan in the '60s," said Anderson, the UBS economist.
Even so, China's overseas investments have already provoked some alarm: national security concerns over Cnooc's takeover bid for the American oil company Unocal in 2005 killed that deal. Haier's bid for Maytag was cut short the same year by a quick counteroffer from Whirlpool.
Emotions have already risen in Britain recently over plans by Burberry to move production to China. Even Prince Charles has added his voice to protests that this major British brand would be made on the Chinese mainland.
Given those problems, Nanjing Auto, the oldest Chinese automaker, is eager to keep a low profile and has been careful to preserve the British face of its famous brand, lest the new MG become nothing more than a Chinese competitor to the Miata, which is made by Mazda.
MGs were the world's first affordable sports cars and became classics of their time. While the Italians built flashier sports cars for the rich, MG's British owners developed a loyal following among average-income automobile aficionados who still refer to MG's logo as the "sacred octagon."
"Emotion is the most important factor in purchasing cars," said Wang, the Nanjing Automobile executive. "That's why we feel the brand is so important and is why we want to protect the British flavor of the brand."
Rising labor costs and a series of missteps by British Leyland, which manufactured MG during its 1960s heydays, led to the sale of MG to several different owners before bankruptcy finally ended production in April 2005.
Nanjing Auto bought all of the MG plants tangible assets, together with the rights to some of the most famous British automotive brands, including MG, Morris, Austin and Austin-Healey. It crated up most of the manufacturing equipment and shipped it to Nanjing, where it has been reassembled.
On March 27, Nanjing Auto's 60th anniversary, the Nanjing plant will start producing two MG models: the MG7, a five-seat, four-door sedan, and the MGTF, a two-seat, two-door convertible sports car. It hopes to eventually export the MG7 to Europe.
But the company has also signed a 33- year lease on a portion of the Longbridge factory site and this year is to begin producing the MGTF there for sale in Britain and eventually continental Europe.
Negotiations are even under way to produce a hardtop version of the MGTF roadster through a joint venture in Oklahoma, and Wang said that he hoped that Americans would soon be able to buy an MG.
Wang took a visitor across the empty factory compound to an unused conference center inside that housed the office of Herbert Austin, who founded Austin Motor, which became a part of British Leyland.
Inside the musty, wood paneled office, filled with original furnishings, Wang pulled opened a drawer, releasing a hidden mechanism and allowing the top of Austin's heavy oak desk to slide back, revealing a secret compartment containing a guest book, its pages filled with the signatures of visitors.
"Royalty signed here," Wang said with evident pride. The book contains the signatures of Prince Phillip, Princess Margaret and Lord Snowdon.
Outside sits a collection of gleaming cars that represent some of the finest specimens that Britain's auto industry ever offered, including a lavish two- tone green 1938 MG sedan with graceful fenders and running boards, as well as an MGB sports car, the most popular British sports car ever made.
Because organic growth is too costly and too slow, Wang said, "the Chinese strategy to get into the market is to go for mature, established brands that might have had some trouble."
|
