Posted by: David Kiley on July 7, 2008
Caijing Magazine quotes unidentified sources as saying Chinese automaker Chery is looking for bank and equity investor help for a possible bid for Volvo, Ford’s Swedish nameplate.
Hmmm. Chery has not exactly been a good judge of opportunity, talent or value up to now. And this deal, if true, is no exception.
Chery is known for its obstinate, unbending, mercurial ways of doing business with Westerners. Just ask the folks at Chrysler who have been trying to get a small car program off the ground with the company. It’s aborted foray into the U.S. via a deal with Malcolm Bricklin speaks for itself.
It will take, I’m guessing, something like $4 billion-plus to get Volvo away from Ford. And then, you have some pretty dug-in, obstinate Swedes to deal with. You want to know how tough to work with? Just ask the Ford people who have been trying to wring costs out of that unit for the last eight years. Saab workers, I think, may be more flexible to do a deal on labor costs and rules with Chery knowing the company is not going to be as bendable as GM has been.
If Chery really wants to buy into the West, it should try and take advantage of General Motor’s neediness right now. Make GM an offer to take Saab Cars off the automaker’s hands. No money changes hands. And offer them $1 billion for the Buick brand or Pontiac brand. Why Buick? Buick is huge in China. Go figure. Yes, the joint-venture GM has in China is with Chinese automaker SAIC, so that might be a stumbling block. But Pontiac could be an interesting flyer to take. Again, GM might just give the brand to Chery if it will assume the task of supplying dealers with product to head off lawsuits against GM by dealers. Then, combine product development and distribution of Saab and Pontiac businesses in China and Europe, and send China-made Pontias that are Federalized over to the U.S. to dealers who still want to carry the brand.
Chery could probably strike some sort of alliance deal with GM through which GM stays in the manufacturing end of Pontiac as a U.S. alliance partner. But I’m guessing GM might want to be done with it as much as possible and show Wall Street is finally taking out the trash.
GM, because Buick is so strangely popular in China has been loathe to part with the brand. But it would gladly give up Pontiac and Saab.
If the Swedes give you pushback Chery, tell them that Saab manufacturing is moving to China or Eastern Europe, or the brand will be shuttered. You won’t have paid anything for it, so you have nothing to lose. Closed. Done. Here is a secret. Saab Cars has never…NEVER, NEVER, NEVER…earned a dime. Whatever profits have been squeezed out of Europe have always been more than offset by losses in the U.S. That’s why GM would be glad to get rid of it for free.