Is China Merging Its “First” and “Second” Auto Works Into A Car Kaiju?

Preparing for the storm?

Preparing for the storm?

Consolidation has been the law of the auto industry ever since Ford’s assembly lines unlocked the brutal logic of scale, but fears that the US and Chinese markets may be cooling have automakers even more anxious to grab quick growth by merging. Last week, Fiat Chrysler Automobiles CEO Sergio Marchionne gave voice to the industry’s building anxiety by all but apologizing for his industry’s low rate of return on capital and threatening to explore mergers with Silicon Valley firms if no automaker wanted to acquire it. Marchionne’s position may be more desperate than some of his better-established competitors, but his basic logic is resounding across the auto industry.
When trading in shares of the Chinese automakers First Auto Works and Dongfeng (known until 1992 as “Second Auto Works”) were halted this week, the market’s initial read was that a merger between two of China’s biggest automakers was in the works. Dongfeng issued a swift denial of any merger plans but the Chinese state council shook up leadership at the two state-owned automakers, replacing the chairman at each with a man who had previously served at the other. With its automakers outmatched even in their home market, China appears to be pushing two of its “big four” manufacturers closer in hopes of creating a national champion with the scale to take on the global majors.

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PSA, Europe’s second-largest carmaker, taken over by two governments

 

They make those too

Dongfeng makes those too

As the Chinese New Year (where all of China pretty much shuts down for pretty much a month) edges closer, the deal to provide PSA Peugeot Citroen with a desperately needed capital injection is edging closer. The bottom line is that PSA will be saved by two governments, the French and the Chinese. The French do the deal to preserve jobs and prestige. It will be interesting to see what the Chinese will make out of it. [Continue Reading]

Without the Corsa, GM’s deal with PSA is dead

2010 Opel Corsa Color Race

When, in early 2012, GM bought seven percent of the moribund PSA Peugeot Citroen, with the intent of coupling it with its likewise moribund Opel, just about everybody who understood the car business developed deep lacerations from incessant head-scratching. Combining two sickos usually is not a recipe for health. Unimpressed by logic, the happy couple promised annual cost savings of $2 billion. Now, the deal is entering the terminal phase. [Continue Reading]

PSA and Dongfeng: Beware of Chinese dragon stories

The Dragon Slayer - Picture courtesy wallpaperama.com

Why fight – let’s split the bill instead

 

Gullible blogs reported end of last week that China’s Dongfeng is buying 30 percent of cash-strapped PSA. This after China Business News said that it’s true. Not so fast, said PSA today. The French automaker confirmed that “it is examining industrial and commercial developments with different partners, including the financial implications that would result from them.” However, “none of these projects has reached maturity yet.” [Continue Reading]

Chinese rumors: Dongfeng ready to pay 10 billion for 30 percent of PSA – in Chinese money

Chinese abacus 2 - Picture courtesy ebay.com

It’s interesting to see how different cultures react to the same non-news: In Europe the continuous drip of remarks about a possible partial sale of PSA to China’s Dongfeng is being met with Gallic shrugs, or whatever shrugs they have in other parts of Europe. The blasé EU thinking is that it’s a PR maneuver to cow the French government and the French unions into accepting painful cuts to ward off the yellow peril.  Steve Girsky’s recent remarks to Reuters,  in which he said that GM won’t  be in the way should PSA couple with Dongfeng, fit into this scenario. GM wants the European bleeding stopped, it doesn’t want a new competitor in China.  The Chinese have a completely different view.

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GM won’t object to PSA/Dongfeng tie-up, does not expect a big EU turn-around, has no idea about Bochum cost

Girsky-Akerson Picture courtesy turner.com

Girsky-Akerson Picture courtesy turner.com

Reuters star Detroit reporter Ben Klayman had an interview with GM Vice Chairman Steve Girsky  today, and a few interesting tidbits transpired. Here  they are, bulleted: [Continue Reading]