Mainland carmakers enter talks for Chrysler

PUBLISHED : Wednesday, 28 February, 2007, 12:00am
UPDATED : Wednesday, 28 February, 2007, 12:00am


Related topics

SAIC seen as having best chance to buy the struggling DaimlerChrysler unit

Three mainland carmakers have separately begun talks with DaimlerChrysler about potentially buying its United States-based Chrysler unit in order to speed up their global expansion, according to sources.

Shanghai Automotive Industry Corp (SAIC), Jilin-based FAW Group Corp and Anhui-based Chery Automobile have joined carmakers from around the world in early talks with the German company about acquiring all or part of the third-largest US carmaker, the sources said.

They did not say whether any of the mainland players were planning to be part of a joint bid with foreign rivals.

Among the mainland competitors, US industry players rate Shanghai-listed SAIC, the country's largest carmaker, as having the best chance to take over the struggling Chrysler, due to its easy access to the capital market and experience in buying global carmakers.

In 2004, it bought South Korean sports utility vehicle maker Ssangyong and the intellectual property rights for Rover 25 and Rover 75 from bankrupt British-based MG Rover.

While there is always a concern about a mainland company taking over a US icon - even a faded one such as Chrysler - analysts generally agree that if SAIC or one of the other two mainland companies offered the highest bid for the US firm, or was part of a consortium that did, it would have a chance of winning.

But if the price offered was similar to ones proposed by US or European rivals, then DaimlerChysler might choose to deal with them to avoid the potential of a political imbroglio.

In 2005, CNOOC was pressured to withdraw its bid for US oil firm Unocal Corp in the face of a Washington backlash. But analysts said regulatory hurdles for this deal would not be as bristling as for an oil company.

According to a report in the Shanghai-based Oriental Morning Post yesterday, citing unnamed sources, FAW, one of China's three largest carmakers, has already sent representatives to the US for talks.

A spokesperson for FAW Xiali, FAW's Shenzhen-listed vehicle, said it would not comment. Representatives for SAIC could not be reached for comment.

Wang Wei, a spokesperson for Chery, said yesterday his company would not comment on the potential acquisition.

Mr Wang also said his firm would not have any announcement for at least six months regarding a Bloomberg report yesterday that talks were in an advanced stage with Chrysler about it buying more car parts and models from Chery. He admitted both parties were in talks on further co-operation.

Yesterday, the German company's supervisory board ratified a previously signed limited partnership agreement with Chery that will see it build small, economical cars distributed in North America and western Europe under the aegis of Chrysler brands, according to Associated Press. The deal still needs to be sanctioned by Beijing.

Mainland carmakers have been racing to acquire or link up with foreign firms to aid in expansion, technological know-how, brand reputation and distribution networks.

Last year, both SAIC and Nanjing Automobile bid for MG Rover. A deal was worked out by Beijing that gave Nanjing Auto the rights to the MG Rover brand for US$97 million and SAIC the intellectual property rights over the Rover 25 and 75 for #67 million (HK$1.02 billion).

German media reports earlier said DaimlerChrysler was expected to decide this year about what to do with its Chrysler subsidiary.