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DaimlerChina
Page 32
Page 33
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DaimlerChrysler plans to buy a stake in Chinese manufacturer
Beiqi Foton — but 240/o may not be enough for DC to achieve its aims in a volatile, high-risk market. Oliver Dixon reports.
China is in the news once again, with the news that DaimlerChrysler (DC) intends to buy 24% of Chinese truck and pickup maker Beiqi Foton Motor Co.The deal will cost the Germans $104m (£53m), assuming it wins Chinese regulatory approval.
We disapprove of this development, for more than one reason. DC has long been keen to get Beiqi Foton to the bednmm.but has run up against regulator), difficulties owing to its existing Chinese interests. It has a joint venture with Fujian Motor Industry Group and Taiwan-based China Motor Corp, which produces Sprinter and Viano vehicles, while Yaxi ng Benzin which DaimlerChrysler and Jiangsu Yaxing Motor & Coach Group each own 50% , is in the bus business.
DC has long wanted to put its own Mercedes-Benz (M-B) trucks into China, and this is what the Beiqi Foton deal is all about. But a 24% stake is unlikely to give DC a licence to produce M-B-badged trucks there. Most analysts are reasonably confident in stating that such a licence would only be forthcoming as a result of a fully fledged joint venture. But the days of an open-armed welcome for such a proposition are numbered. if not over.
The times are changing When we spoke to NI-B truck boss Hubertus Troska at the IAA show in Hanover in Septembet., he made the point that things are changing. "We're gettingsignals that maybe joint ventures are not the way that Beijing wants to play any more," he said."Maybe equity participation has more potent A 24% stake is equity participation, but what is DC getting for its money? An opportunity to manufacture and market M-B trucks in China? It seems not. Management control of Beiqi Foton? Dream on.The opportunity to transfer technology into a company that is looking at export markets? Now you're talking. Beiqi Foton is already looking overseas; it recently struck a deal with Saipa in Iran that is likely to lead to the production of a six-tonne truck for domestic Iranian and export customers. Cheap Atego, anyone? Iran might he a bit of a touchy subject at present. but M-B has a relationship with Iran Khodro Diesel, and Saipa is Iran Khodro's big rival.
Moreover, the Middle Fast and Africa are important export markets for M-B,and one has to wonder how it will compete with a product likely to contain its own technology with a list price reputed to be in the region of $18,500 (9,4O0). Ibis all smacks of a deal done for the sake of a deal. There is little sign of a coherent strategy or discernible development plan.
But if the deal stinks today, what about tomorrow? To our mind. China is a disaster waiting to happen. If you invest in China, the payback is likely to take the form of a poke in the eye. With what — and how quickly — that poke
arrives varies from deal to deal, but it always arrives.The reasons for our cynicism are twofold. On the one hand, there is no similar business model to that operating in China anywhere else on earth. Predictions, forecasts and the like are meaningless, because in the world's biggest country, business is driven by politics In recent weeks, there has been a discernible shift away from open market economics within the Chinese government.There are some tasty tax breaks to be had at the moment; were that to change — and it wouldn't take much for that to happen — then the cost of doing business within the People's Republic would soar.
Add to this the problems associated with the valuation of the yuan — regarded by everyone but the Chinese as needing a seriously upward revaluation—and one has a recipe for economic mayhem. But the really dark clouds lie o other side of the Pacific. because Ch economic miracle is not home-grown average Gabonese worker is earning more the average Chinese wage slave, so talk growing middle class seems a little premir China relies on its export markets, an biggest export market is the United States
Failures in the US
The US economy is in a dreadful state a moment. Business foreclosures are increi almost exponentially. The recent Delta lines bankruptcy case has created a monst pensions hole among the baby hoc generation, and these people are likely I hoarding rather than spending money ir coming months.
Put simply, Americais about to stop. America stops, China — which sends 22% , exports to the land of the free — is likely to down. And when China slows down, so do, demand for trucks.
DC is a global vehicle manufacturer, a wants to have a truck presence in China. Fr, corporate PR perspective, that's understand From any other perspective the Beiqi makes no sense. It is a cost without a bene perilous investment in an unstable econorr But surely the folk in Stuttgart know they're doing. Don't they? •