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This year, the merger and reorganization of the automotive industry has become a hot topic. Recently, Dongfeng and GAC, the two major Chinese car dealers, initiated restructuring and integration of Fuqi and Zhongxing Automobile. Such intensive inter-firm restructuring is not just a coincidence. There are various indications that a new wave of mergers and reorganizations in the domestic auto industry in 2013 will set off an upsurge again.
Intensive policy introduction
After a long period of silence, the reorganization of domestic car prices finally reached the point where it was concentrated. In recent years, China's policy of encouraging the merger and reorganization of the automobile industry has continued to increase. Since 2006, China has introduced a number of policies to accelerate the new wave of restructuring in the industry's auto industry. In 2009, the “Regulations for the Adjustment and Revitalization of the Automotive Industry†was issued, which explicitly proposed to encourage SAIC, FAW, Dongfeng and Changan Automobile Group to carry out national mergers and reorganizations, and encouraged BAIC, GAC, Chery and China National Heavy Duty Truck to carry out regional mergers and reorganizations. Strategic concept. In 2010, the State Council issued the "Opinions on Promoting Mergers and Reorganizations of Enterprises", which will clearly promote the implementation of strong alliances, mergers and acquisitions across regions, and increase the degree of industrial concentration.
In early 2012, the State Council also issued the "Industrial Transformation and Upgrade Plan (2011-2015)", again raising the issue of automobile industry concentration. In January of this year, 12 ministries and commissions such as the Ministry of Industry and Information Technology issued the “Guidance Opinions on Accelerating the Promotion of Mergers and Reorganizations in Key Industriesâ€, and the automotive industry ranks first in the nine key merger and restructuring industries. According to policy requirements, by 2015, the industry concentration of the top 10 vehicle manufacturers will reach 90%, forming 3 to 5 large-scale automobile enterprise groups with core competitiveness. To this end, some industry insiders boldly predict that by the year 2020, China currently has as many as more than 130 automotive corporations, more than 40 automotive groups, and more than 100 local brands, which will be integrated into several large auto groups. They are either merged or die.
A few days ago, the National Development and Reform Commission announced for the first time that the company’s production qualifications would be revoked. The list of companies that intends to cancel WMI (world manufacturer code) was published on its website. Among them, 124 companies were planned to be permanently terminated or disqualified, and 23 companies Some of the products are intended to be disqualified from production. It is reported that the basic qualifications for canceling production are enterprises with low or even zero production capacity. This shows that the country is adopting a series of policies to strengthen macro-control, including controlling production capacity, strictly examining and approving new construction projects, and supporting superior enterprises to become bigger and stronger. It is likely that the stronger the stronger and the weaker the weaker, the “Matthew effectâ€. This also means that the pace of corporate mergers and acquisitions will be further accelerated. On the other hand, judging from the global development trend, strategic alliances among enterprises or joint technological development will be the inevitable choice for the survival and development of car companies in the future.
Where does power come from?
Following the alliance with Chery, GAC Group won another city in its strategic cooperation with foreign countries. Recently, Guangzhou Automobile Group, Zhongxing Automobile, and China Auto Parts Industry Company three parties signed a memorandum of strategic cooperation in Yichang, Hubei Province.
Similar to the previous alliance with Chery, GAC's alliance with ZTE and China Auto Parts Industry Co. did not involve equity cooperation. Both parties plan to cooperate in vehicle development, spare parts research and development, energy conservation and new energy vehicles, international business, logistics and transportation. Obviously, such cooperation can be seen as a continuation of GAC’s “strategic alliance†form of cooperation. Although in the short-term, Zhongxing Automobile has not provided much help for Guangzhou Automobile, Guangzhou Automobile has thus realized its industrial layout in Central China.
Coincidentally, when GAC looked around for "cooperation", another "national team" had no intention of keeping the east wind. Recently, Dongfeng and Fuzhou signed a framework agreement that includes Dongfeng’s capital increase in Fugas and the joint venture with Fuqi to establish an investment company to hold Southeast Automotive. Through this restructuring, Dongfeng Motor not only can own 45% of the equity of Fuqi Group, but also can be used to refer to Southeast Motor.
Fortunately, this merger and reorganization of the two major groups, compared to the previous mergers and acquisitions, has a distinct "market" characteristics, showing a different new model and new connotations. This has a significant enlightenment role for subsequent enterprises to cut off local protection. Among them, Guangzhou Automobile entered the Central China this time, did not start equity cooperation with Zhongxing Automobile, but its wholly-owned subsidiary Guangzhou Automobile Passenger Vehicle will restructure ZTE Yichang Company, and set up Guangda Yichang Branch. Dongfeng Motor also did not use the administrative restructuring of asset allocation. Instead, it used the model of establishing an investment company to achieve control over Southeast Motor, forming a conditional equity transfer model. Adopting such a model fully reflects the characteristics of market-based reorganization, can better guarantee the interests of the reorganized party, and provide model effects that can be used for reference for the restructuring of other companies. Undoubtedly, the merger and reorganization of the two major automobile groups will facilitate the concentration of industries and the effective use of existing production capacity resources, avoid duplication of production capacity, and is also the result of the government's encouragement of horizontal mergers and reorganizations of car companies.
May wish to wait and see
It is undeniable that in the course of the development of the automotive industry in China, not every case of mergers and acquisitions was successful. For the young Chinese auto industry, the institutional components are complex and interests are involved in all aspects. The difficulty and complexity of mergers and reorganizations are much higher than those faced by multinational car companies. Taking the cooperation between Dongfeng and Fuqi as an example, it has always been tricky because of the involvement of too many stakeholders. GAC once lost the hand. The previous signing of Dongfeng's contractual delay has also revealed the difficulty of reorganization. Experiences and lessons from the international auto industry also prove that there are not only the balance of interest in the joint reorganization but also the issue of cultural integration.
Although it is difficult to do mergers and reorganizations, the voice of vigorous promotion is getting higher and higher. The reason for this is not merely to stay in the throes of a company. In the final analysis, for the “big man†in China’s auto industry, it is imperative to be strong. To be strong, mergers and reorganizations are a way to go around. Many companies lack the overall strategic considerations for mergers and reorganizations, lack awareness of risks, and have certain blindness in mergers and acquisitions; there are some merger and reorganization projects that are well-developed, and there are prevention and control plans for risks in the early stages of mergers and acquisitions, but The integration of assets, personnel, management, and culture after mergers and acquisitions has not done enough, eventually leading to the failure of mergers and reorganizations.
Promoting mergers and reorganizations is a matter that requires great courage and wisdom. It requires the consensus and compromise of various interest groups. The auto industry is an economy of scale, and it can only be scaled if it is large enough.
From the new "Opinions" issued by 12 ministries and commissions such as the Ministry of Industry and Information Technology, it can be seen that the competent departments have very good wishes, but whether these ideas can be better implemented depends on how the auto companies and local governments respond.
