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Recently, news about reorganization of auto parts companies has gradually increased.
Not long ago, Zhejiang Hangzhou West Lake Auto Parts Group successfully acquired 100% equity of Hangzhou Hangzhou Friction Material Co., Ltd. (hereinafter referred to as “Hangmoâ€).
Recently, Henan Fengshen Tire Co., Ltd. completed a total of 81.791 million yuan in the acquisition of the entire equity interest of Sanhe LiZhong Power Co., Ltd.
In addition, Fengshen Tire also plans to invest in the acquisition of Henan Tire Group's annual production capacity of 500,000 sets of radial tire production lines.
The government actively promotes industrial integration
During the "two sessions" in 2008, Premier Wen Jiabao mentioned three major aspects of the automobile industry in the "Government Work Report." In addition to advocating independent innovation and encouraging energy conservation and emission reduction, it is actively promoting industrial integration.
When referring to the several tasks highlighted in 2008, Premier Wen Jiabao said that China will "promote the reform of state-owned enterprises and improve the ownership structure. We will continue to promote the adjustment of state-owned capital and the restructuring of state-owned enterprises. We will deepen the reform of state-owned enterprises and shareholding systems, and earnestly implement them." Encourage, support and guide individual policies for the development of the private sector and other non-public sectors of the economy, especially addressing market access and financing support issues."
Premier Wen's remarks reminded reporters of the cooperation between Brilliance and SAIC in the transmission field. On January 23, Brilliance Automotive Group and Shanghai Automotive Transmission Co., Ltd. signed a cooperation agreement in Beijing. The two parties cooperated in the production of manual transmissions for passenger cars and light commercial vehicles, and jointly developed automatic transmissions with their own brands. The project received strong support from the government’s policy of rejuvenating the old industrial base in Northeast China. Zhang Guobao, deputy director of the National Development and Reform Commission and director of the Office for the Revitalization of the Northeast Old Industrial Base, said that this cooperation is of great significance and has opened the door of cooperation in the key component of transmission. It is hoped that in addition to SAIC and Brilliance, there will be more auto companies joining together in the development of key components. The National Development and Reform Commission will also actively promote the integration of the auto parts industry.
As the auto parts industry is an industry that relies on economies of scale, our government has always encouraged companies to become bigger and stronger and promote industry consolidation. Since 2008, the government’s determination in this regard has become more apparent. It can be foreseen that in 2008 the Chinese government will play a greater role in promoting mergers, mergers, and restructuring of state-owned parts and components companies, and will play a more active role in guiding the integration of other economic entities such as private parts and components companies. So, will the auto parts industry usher in a wave of reorganization and mergers in 2008?
Most corporate watchers
In recent years, China's auto parts industry has made considerable progress. However, with numerous companies, the phenomenon of repeated industry construction and internal friction has become increasingly serious, resulting in a lot of waste of resources and impeding the development of the automotive industry. “In this case, the integration of auto parts industry is the trend. Although the situation is much better than in previous years, but from the current situation, the auto parts industry consolidation is not enough.†Secretary General of China Automobile Industry Advisory Committee Teng Bole said.
As Teng Bole said, at present, the pace of integration of local auto parts is relatively slow. In an interview, the reporter found that although companies such as Zhejiang Hangzhou West Lake Auto Parts Group and Fengshen Tire started to take action, more companies are still watching. Although the government is strongly encouraging and appealing, but for the merger and reorganization, the enthusiasm of the local auto parts companies has obviously not reached the high point, the integration of China's auto parts industry is still difficult to blow the "assembly number."
At the end of 2007, Xinyi Glass Group acquired the entire equity interest in Shenzhen CSG Auto Glass from China Southern Cypriots Group with cash of RMB 234 million. This is the first acquisition of Xinyi Glass Group, and it is also a rare large-scale acquisition case in the automotive glass industry in recent years. Zhang Haoheng, secretary-general of the China Construction Glass and Industrial Glass Association, said that the dream of China's auto glass companies to be bigger and stronger must be scaled up, but the possibility of large-scale mergers and reorganizations in the automotive glass industry is still relatively small.
Gu Hongzheng, president of the China Rubber Industry Association, also told reporters that there are not many tire industry reorganizations and alliances. “Now many of the ideas for corporate integration are not mature enough. Every company wants to be the leader of its own, lacking the spirit of mutual benefit and win-win, and is not willing to join forces with other companies. In this regard, relevant associations and industry managers are very helpless.†He said.
There are many obstacles to the merger and reorganization
The combination, reorganization, and merger of enterprises can expand industry concentration, optimize industry structure, optimize resource allocation, and play an important role in the healthy development of the entire industry. Geng Hongzhen analyzed that these reasoning companies all understand, but there are not many actors. Apart from the lack of inclusive and mutually beneficial mentality among the above-mentioned enterprises, there are still some unresolved difficulties.
Cross-regional and cross-industry integration will often be constrained by local government and industry management departments. Some parts and components companies reported to reporters that they were interested in acquiring state-owned parts and components companies in other provinces, but were obstructed by local governments and failed to acquire them. There is also a major obstacle to the merger and reorganization of local auto parts companies. It is a single financing channel and lack of M&A funds. Due to lack of funds, many companies are interested in integrating to achieve economies of scale, but they are not able to implement mergers and acquisitions.
Some parts and components companies are concerned that after the expansion, they will have a large share and will be difficult to manage. A deputy general manager of a parts and components company in Shandong told the reporter that before HangMex was acquired by Zhejiang Hangzhou West Lake Auto Parts Group, his company planned to acquire Hangmo, but because the conditions were not mature at the time, they were also worried that the stalls would be too large after the merger. Difficult to manage, gave up.
The integration of auto parts market is still difficult to sound "assembly number"