Multinational companies follow three principles in M&A in China. Foreign companies must hold shares. Acquired companies must be industry leaders and their future returns must exceed 15%. This has been referred to by experts as a “dagger†type M&A.
With the increasingly serious trend of foreign capital in the domestic auto parts industry, the safety of the entire industry is becoming an imminent problem.
On November 20, the Bureau of Industrial Injury Investigation of the Ministry of Commerce held a meeting to discuss issues related to China's industrial safety. Among them, the issue of industrial safety of auto parts has become a focus of discussion at this conference. The participating experts stated that in the car zero When the monopoly tendency of the component industry for foreign capital arises, it should pay close attention to this area and pay attention to the issue of industrial safety.
At the beginning of joining the WTO, the automotive industry was one of the industries most concerned about the impact, but after five years of verification, the automotive vehicle industry has stood the test. However, on the other hand, the safety issues of the auto parts industry, which were not noticed at the time, have become more and more prominent. With the reduction of tariffs and the restrictions imposed by foreign investment in the parts and components industry, multinational companies have invested heavily in the spare parts industry in China. The trend of sole proprietorship, which poses a serious challenge to the safety of China's auto parts industry.
Sole ownership of parts and components industry is serious
The joint venture between the giant Bosch Group and Wuxi Weifu Group is undoubtedly a typical example.
Bosch Automotive Diesel Systems Co., Ltd. is a joint venture between Bosch Group and Wuxi Weifu Group. The proportion of joint ventures is Bosch Group's 67% share, Weifu 33% and company's registered capital of 200 million US dollars. According to the joint venture agreement, Weifu produces products below Euro II, Euro III products are produced by joint ventures, and Weifu Group's original technology developers enter the joint venture.
At the seminar, experts from the meeting stated that through the cooperation with Wuxi Weifu Group, China’s largest manufacturer of diesel fuel systems, the diesel fuel injection system, which was originally priced at 7,000 yuan, now sells for 12,000 yuan, and Bosch has almost “controlled†it at home. The supply of diesel fuel injection systems has brought certain risks to the healthy development of the diesel fuel system industry in China.
Such cases are not uncommon in China. In the process of shifting from the automotive value chain to the components and sectors, multinational giants have accelerated the pace of investment in China's auto parts sector. Statistics show that in the first half of 2006, the total investment of multinational auto parts companies in China reached 13 billion yuan, and the amount of each investment was more than 100 million yuan. At the same time, the investment scope of multinational companies is becoming wider and wider, from the engine and the chassis. , omnidirectional gearboxes, automotive electronic components, etc. are omnipresent. In these cooperations, foreign parties have shown a strong desire for control. In the first half of this year, Delphi, Mahles, Bosch and other multinational companies have exceeded their newly established production bases in China. Of the 10 companies, more than 90% of them are wholly-owned enterprises. This year, parts and components companies have successively established 3 wholly-owned R&D centers that invest hundreds of millions of dollars. With the help of wholly-owned parts R&D centers and production bases, multinational giants have begun to increase the number of domestic auto industries. New intellectual property rights in the bag.
If it is said that the multinational giants in the general auto parts industry still take the form of joint ventures, then in key auto parts investment projects such as engines, transmissions and chassis, the transnational giants are almost exclusively in the form of sole proprietorship. In 2005, China’s investment in parts and components in the component sector reached 4 billion U.S. dollars, among which key components such as engines, transmissions, chassis, and brake systems and related project investments accounted for the largest part of the total investment. Among these investments, The share of wholly-owned enterprises accounts for nearly 70%.
Wu Qijin, deputy director of the International Cooperation Department of China Federation of Machinery Industry, said that at present, there has been a tendency for foreign capital to invest solely in the auto parts industry. Some international giants such as Caterpillar and Bosch have to invest in China. Sole proprietorship or controlling form.
Multinational company's holding strategy
Compared with the joint-venture or direct investment of multinational giants, the industry is even more uneasy: Giants rely on their own capital and technical advantages to integrate and purchase domestic backbone component companies.
"In the course of joint ventures and cooperation with multinational corporations, a clear trend is that multinational corporations are beginning to seek control over leading companies in the domestic auto parts industry." Wu Qijin said, "From an industrial safety perspective, we are not afraid of multinational corporations. We are building new factories in China, but the strategy of multinational companies is to control the leading companies in the relevant industries in the country rather than the strategy of building new plants."
This strategy, which is similar to the "dagger action", may hit the domestic parts and components industry even more severely.
Before the 1980s, Weifu was called the Wuxi Oil Pump Nozzle Factory. It was a farm machinery company and its products were mainly used for diesel engines for tractors. In 1984, Weifu Hua spent 30 million yuan to introduce Bosch's A-type pump manufacturing technology. In 1998, Wuxi Weifu High-Tech Co., Ltd., a core company of the Group, has become a listed company with outstanding performance in A and B shares. Weifu Group has also become the largest manufacturer of domestic diesel fuel injection systems.
However, through a joint venture with Weifu, Bosch can easily say that it has "held" the domestic fuel pump industry. Compared with the construction of a new plant, Bosch has saved both land and construction costs, as well as Weifu's original All customers accepted, saving the cost of market development, in the non-equivalent proportion of joint ventures, the technical center established by Weifu for many years was cancelled and merged.
In the auto parts industry, the actions of multinational companies to “eat up†leading domestic companies have become quite obvious. In key enterprises in the auto parts field, a group of pioneer companies such as Weifang Diesel Engine Factory, West Blower (Group) Co., Ltd., and Hangzhou Advance Gearbox Group Co., Ltd. have been closely watched by multinational corporations, among them, the world-famous transmission giants. Germany's "ZF" company is seeking to acquire Hangzhou Advance Gearbox Group Co., Ltd.
In the tire industry, after years of mergers and acquisitions and integration, the Chinese tire industry, which used to be dominated by state-owned enterprises, is now only a few Chinese-funded enterprises such as the Triangle Group and Guizhou Tyre, and these tire companies are also being surrounded. In the joint venture or cooperation negotiations of multinational tire giants such as Michelin and Goodyear.
Revaluation "market for technology"
Due to the current restrictions on the proportion of auto OEMs in China, auto parts manufacturers will become hot spots for mergers and acquisitions. The upstream industries of the vehicle such as chassis and tires will become the focus.
Leading companies in the industry choose to enter into joint ventures with multinational giants, which are mainly limited to the need for technological upgrading. They hope to continue to take the road of market-for-technology and introduce advanced international technologies and equipment. However, along with changes in the market environment, is this road still alive? It is worth working out.
According to a report from China Industry News, the director of the National Development and Reform Commission's Industry Department, Mr. Chen Jianguo, pointed out sharply that: “They bought or controlled the Chinese vanguard companies. The purpose of the purchase was not to develop, but to destroy it, and to destroy the brand. Some of them are to extinguish the enterprise, and the purpose of extermination is actually to further monopolize."
At present, MNCs follow three principles in M&A in China, that is, the foreign party must be controlling, the acquired company must be the leading enterprise in the industry, and the future earnings must exceed 15%. This has been referred to by experts as a “dagger†type M&A. Wu Qijin said that this form of merger and acquisition has a great impact on China’s industrial security.
However, whether foreign investors in the auto parts field will be able to exchange technology for Chinese companies again? Dr. Lei Jiabiao, deputy director of the Department of Technology, Economics and Management at Tsinghua University's School of Economics and Management, who is engaged in research on national economic security issues, told this reporter: “At present, we are investigating the technological changes in the automotive industry in the new era.â€
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