During a press conference in Hong Kong, Mr. Zhang said he is looking for acquisition targets in the northeast China city of Shenyang.
He was clearly referring to Shenyang Brilliance Jinbei Automobile Co., but that company quickly responded with a statement saying it will remain independent.
That's a pity. Given its increasingly weak position in China's fast-growing auto industry, a tie-up with Guangzhou Auto offers an ideal way for Brilliance to escape its current predicament.
Incorporated in 1991 as a light bus manufacturer, Brilliance was a pioneer among Chinese automakers. In 2000, it started making sedans under its own brand name, Brilliance, ahead of larger domestic rivals such as FAW and SAIC.
However, the company gradually hollowed out after the departure of its former boss, Yeung Yung. In 2002, he fled China after being sued by the company's owner, the Liaoning provincial government, for unspecific economic crimes.
Left in the firm grip of the Liaoning government, Brilliance changed top executives four times between 2002 and 2006.
Since 2006, the company has suffered a brain drain. In 2006, technology chief Frank Zhao left to join Zhejiang Geely Holding Group Co. Yang Bo, the head of its international business operation, left for Chery Automobile Co. in 2008. This year, sales chief Liu Zhigang joined Huatai Automobile Co.
Unstable management and a lack of talent have slowed Brilliance China's product development. To date, Brilliance has developed only three sedan models--the Splendor, Zunchi and Zhonghua M3, all compact cars.
Brilliance's joint venture with BMW is profitable, but its own-brand manufacturing unit suffered a $397 million operating loss last year.
To be sure, Brilliance's sedan sales soared 91% in the first six months of 2010, compared with the year-ago period. But the relief was short-lived; July sedan sales dropped 10% to less than 10,000 units.
After ten years of effort, Brilliance has failed to build a sustainable car brand. Moreover, its once-solid light bus unit also has lost money in the past two years.
To shore up its operations, Brilliance must make a huge investment to develop new models, but its weak balance sheet limits its ability to sell stock or borrow from banks.
On the strength of its joint ventures with Toyota Motor Corp. and Honda Motor Co., Guangzhou Auto is probably the most cash-rich Chinese automaker.
And Brilliance has something that Guangzhou Auto is eager to acquire, its own-brand sedans. That makes them a perfect match for each other.
Instead of dismissing a merger outright, Brilliance China's management should give serious thought to Guangzhou Auto's offer.
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