A roadworthy way-out – Geely-Volvo deal marks nation’s first overseas M&As

Different strategy for China

Analysts have beaten to death the question of whether Chinese companies should seize on the downturn to buy ailing overseas brands.

The pros and cons are obvious: overseas MA can bring benefits, but it also brings high risks.

The benefit is that after acquisition, Chinese companies can quickly gain brand names, technology and competitiveness, said Zhao Xiao, economics professor with University of Science and Technology Beijing.

But wide differences in culture and law, as well as a lack of executives with multi-cultural knowledge and managing employees, most MA kills.

Auto manufacturing is a different industry.

“It takes decades to develop global competitiveness and make one’s own brand, like most Japane and South Korean automakers have done,” Zao said.

“Times have changed. As China is already decades behind, it cannot wait even one more year to get one of its brands overseas,” he said.

“Geely’s deal may show Chese automakers have reached a consensus about how to go abroad,” he said.

In October, Sichuan heavy-machinery maker Tengzhong reached a deal with General Motors to buy the luxury Hummer brand. Though still waiting for government approval, the deal was a first step.

Later, BAIC (Beijing Automotive Industry Holding) and SAIC (Shanghai Automotive Industry Corporation) also started looking for acquisitions.

“This is different from the straegy adopted by Japanese and Korean automakers, who relied on organic growth,” Zhao said. “Chinese automakers should rev up their global competitiveness by buying high-end Western technology to apply to home-grown innovions.”