Is Geely Starting a Trend?

Chinese Companies Should Learn to Build Brands, not Buy Them, Says Yang Jian

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SHANGHAI (AdAgeChina.com) -- The day after Ford Motor Co. confirmed Geely as the preferred bidder for its Volvo unit, I was having dinner in Shanghai with a reporter from outside China.

"What brands do you think Chinese companies will buy next?" he asked.

Yang Jian
Yang Jian
"It might be a European brand or....." I mumbled since I was lost for a quick answer.

Then I realized my friend thought the acquisition of foreign brands by Chinese automakers was going to become a trend.

Other domestic players might be keen to follow Geely, in bidding for a world-class brand and its technology to up their game in the global market.

But the window of opportunity for them to do so is closing fast; too fast for Geely's acquisition, if it happens, to be repeated often enough to form a trend.

Why? Because opportunities to buy foreign auto brands are rare. History has shown that an automaker will only let go of a marque when forced to do so by a financial crisis.

That is no less true of the present round of sell-offs than it has been for any other.

Had it not been for bankruptcy earlier this year, General Motors would not have put Hummer and Saturn up for sale. Neither would Ford have decided to offload Volvo.

The financial woes engulfing the Detroit Three were never so deep. The U.S. market is recovering, and it is hard to imagine a crisis as big recurring anytime soon.

This very point, in fact, was made last month by Hummer's CEO Jim Taylor at a media briefing in Shanghai. He was explaining how Sichuan Tengzhong Heavy Industrial Machinery Co. -- an unheard-of Chinese company -- got the chance to buy Hummer.

"It is a unique opportunity that something like this could happen in history," he said.

A unique opportunity, indeed; so unique it might yet not happen.

Last week, an increasingly confident GM reversed its decision to sell Opel. I won't be surprised if it changes its mind about Hummer too.

If the Hummer deal were to fall through, that might be no bad thing for Tengzhong. It would be spared the very real danger of failing to turn the loss-making brand around.

As for other Chinese automakers seeking to follow Tengzhong and Geely, seeing foreign acquisition opportunities dry up and vanish might also be a blessing in disguise.

Deprived of other people's technology and know-how, they might decide instead to learn how to make good cars by themselves; patiently and step-by-step.

That is just how the Koreans and Japanese built their own car industries into two of the world's most competitive.

Yang Jian is the managing editor of Automotive News China, a publication of Crain Communications.


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