Overseas hunters risk geometry Geisha with facts speak

In recent days, in the face of the turmoil in the global automotive industry, news about Chinese car makers overseas bargain hunters have been reported from time to time. Chery’s acquisition of Chrysler followed by Geely’s acquisition of Volvo. The latest argument is that SAIC will acquire GM’s shares in Shanghai GM. However, these rumors were finally denied by the parties. This can not help but make people wonder: Is it true that China's auto companies want to retire overseas?

As we all had different opinions, on February 23, Weichai Power announced a high-profile announcement that: On January 23, 2009, Weichai Power (Hong Kong) International Development Co., Ltd., a wholly-owned subsidiary of Weichai Power, had 2.99 million Euros. The auction won the related assets of Baudouin Company. The book value of this asset was approximately 13,817,700 Euros. At present, the asset transfer contract has not yet been signed and the acquisition project is performing the relevant administrative approval procedures. In contrast to its generic “sex scandal”, Weichai also admitted that Weichai Hong Kong had made initial contact with General Motors in a component manufacturer in Strasbourg, France in December 2008 on technologies, products, and others. The possibility of cooperation has been discussed and investigated. However, there was no contact with the company’s shareholders regarding the acquisition. At present, there has not been any intention or agreement on any cooperation, nor has there been any suggestion of acquisition intention to the company. The company has not entered the relevant decision-making and deliberation procedures on the acquisition.

Being good at finding opportunities in the cracks of the financial crisis and transforming the macroeconomic crisis into business opportunities are indeed essential growth wisdom for companies. However, at the same time that Weichai announced a high-profile overseas acquisition, there are also many doubting voices in China. Some people think that it is too early to take a bargain overseas, and some even predict that overseas bargaining is equal to death.

Although the speech is too extreme, but there is no doubt that the Chinese car companies to acquire overseas companies do have risks. First of all, it is difficult to predict whether the acquired assets are Shannon or hot potato. Secondly, whether overseas Chinese bargain-hunting companies have such strength And financial resources, currently affected by the financial crisis, overseas companies have difficulties in operating. Chinese enterprises not only need to “bottom the bargain”, but also continue to invest funds in the source to restore the acquired enterprise to normal operations. If the enterprise’s own financial strength is insufficient, it does not have enough capacity to control. Loss and turning losses into profits, then the capital chain issue will always be the sword that hangs over Chinese companies; in addition, Chinese companies will also face the risk of dissatisfaction with the water, the differences in management methods and management, and the cultural differences between the two sides. Divide can be a huge hidden danger.

The huge risk has caused many car companies to be very cautious when it comes to topics related to overseas acquisitions. They are reluctant to disclose the slightest hurrah in advance. Compared with the veil of the entire vehicle company, Weichai was very calm about the acquisition and did not hide it. Why Weichai is so confident? Let us analyze the two acquisitions related to Weichai.

With a registered capital of 3.55 million euros, Baudouin is registered in Cassie, Prosvén, France and has a history of more than 100 years. The company is mainly engaged in the design, development and sales of engines and drive assemblies. The main products include: engines, gearboxes, driveshafts and propellers. Through the acquisition, Weichai will acquire Baudouin's products, technologies and brands in the future, promote the company to further explore foreign markets, draw on the experience of product development and technology management with global positioning, expand the company's product range, and promote business synergy. development of. In addition, Baudouin has been producing high-power diesel engines used by the French Navy, which fills the gap in the production R&D technology of Weichai Power's high-power engines of 16 liters or more.

The GM's French parts factory is GM's profitable assets. The French branch mainly produces gearboxes with few employees (1200 employees in Strasbourg, 175 technicians and engineers). Even in this downturn in 2008, the GM’s factory in France still earned 44.4 million euros. Regarding this factory, whether it is an acquisition or "only in the discussion of cooperation in technology and products" as stated by Weichai, the strengthening of international cooperation is beneficial to the company's technical strength and market expansion.

It can be seen that Weichai's overseas acquisitions are mainly centered on its main engine. The purpose is to introduce advanced foreign technology. Through the acquisition of overseas core component technologies, we use the technological advantages, brand advantages and broad market network of international companies in the industry to enhance Weichai Power's own technical capabilities and extend the products to the high end.

This is in line with Weichai's development strategy. It is understood that according to the plan for the next five years, Weichai Group plans to exceed 100 billion yuan in sales revenue, and eventually among the world's top 500 enterprises. Therefore, Weichai has to take the high-end route, not only the traditional low-end price competition route, and must compete with the world's high-end heavy trucks. However, people in the industry all know that the powertrain technology in China is lower than overseas, and is particularly lower than the European heavy-duty trucks group. Relying on domestic research and catch-up, the technological gap in these decades is obviously not feasible. Therefore, we can only take this quick route to acquire advanced technology from overseas.

These are the favorable aspects of Weichai's overseas acquisitions. What are its risks? Related parties pointed out that compared with the scale of Weichai’s assets of about 30 billion yuan, the scale of its overseas acquisitions is relatively small, and the risk factor is also relatively small. Will be smaller. Regardless of the success of the acquisition, there will be no material impact on the company in the short term. Obviously, this is only a small test of Weichai. However, we will wait and see how Weichai will integrate acquisition companies and whether it can be quickly integrated to create benefits. We will wait and see.

Through the analysis of Weichai’s overseas acquisitions, we can see that although overseas dips are a long way to go, it’s not impossible for them to step in and out. So at the present stage, should we go overseas? This issue should be considered from at least four aspects.

First, does the company need it? Enterprises go overseas acquisitions, is nothing more than to solve the problems in the long-term development of enterprises need to solve the technology, product development, brand, management experience and overseas marketing channels and other issues, if these problems can be resolved through their own development, then there is no need to If that is not the case, companies should go out to the outside world and actively participate in international mergers and acquisitions.

Second, whether the venture companies going out can afford it. This is to recognize one's strength, to have sufficient predictability for the difficulties to be encountered, and to have a viable long-term plan for the development of the company.

Third, whether you want to buy is what your company really needs. Now chasing the big brands seems to have become a common problem for overseas mergers and acquisitions by Chinese companies. Instead of blindly pursuing brand effects, they ignore what companies really need. In WeiChai's case, although the mergers and acquisitions are all small companies that are unknown, but they can really make up for the needs of the company's future development. This pragmatic attitude is worth learning from other companies.

Fourth, in order to reduce investment risks, Chinese companies’ overseas mergers and acquisitions can also adopt multiple methods of operation, and do not necessarily need to hold shares. For example, participation in shares, technical cooperation, and joint development can all be tried.

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