♠ Posted by Emmanuel in
China,
Marketing,
Trade
at 3/15/2007 12:25:00 AM
Here is a solution to many of the challenges facing the US and China that no one talks about: sell Ford and GM to the Chinese. We know that Ford and GM are in dire straits, having lost a humongous $12.7B and $2B respectively in 2006. Despite recording a
profit in Q4 2006, GM suffers from subprime housing
collateral damage via its ex-lending arm, GMAC. Both their credit ratings have been reduced to junk status. While GM may not be hemorrhaging cash as quickly as Ford, it too faces colossal pension obligations to the tune of some $47B. The writing on the wall seems clear, at least to me: unless these venerable businesses obtain government support, they will soon go the way of Hudson, Packard, and Studebaker.
On the other hand, we have the Chinese. The Chinese government has recently decided to invest its massive reserve
pile into something that yields better than the likes of American sovereign debt. The current business trend in China appears to be buying up distressed companies that have
recognized brands. At the same time, Chinese car manufacturers are keen on developing cars for the export market. Ford and GM offer an extensive dealer network in America and familiar brands. Voila! A match made in heaven, or at least purgatory in the immediate vicinty of the pearly gates. As bad as Ford and GM's marketing may be at times, it surely can't be as bad as that for the "
Geely Beauty Leopard":
It is an urban sport car. Its pure ardor appears before you boldly. With perfect and smooth lines, it looks wild and sexy. The decorating tail wing and the integrated crystal headlamp, all match your enthusiasm and ardor. Dancing and exciting air contains your romantic disposition, your wisdom and your elegance...
Now, it may be a measure of how far these once-mighty companies have fallen, but Ford's market capitalization last I checked was a mere
$14.2B while that of GM was
$17.1B.
Their cash balances alone are greater than their market caps. They are dirt cheap. Let me put it this way: Google has a market capitalization of
$139.3B--over eight times more than GM's. True, potential Chinese buyers will probably demand that some of these companies' onerous future obligations are not taken on board. As they are now, these firms are nearly more like health care and pension providers than automakers. Some deal will need to be made to reduce these obligations by a good amount. Of course, there will be be a huge political brouhaha Stateside if the Chinese attempt to buy Ford and GM. For that reason, no such deal is likely. If the likes of Global Crossing and Unocal were considered "strategic" interests that were hands-off to these folks, what more Ford and GM? If you think it through, however, selling these marques to the Chinese makes near-perfect sense. Better to have Chinese-American carmakers than defunct carmakers, methinks. American auto manufacturing's last stand is at hand.
On the other hand, we have the Chinese. The Chinese government has recently decided to invest its massive reserve pile into something that yields better than the likes of American sovereign debt. The current business trend in China appears to be buying up distressed companies that have recognized brands. At the same time, Chinese car manufacturers are keen on developing cars for the export market. Ford and GM offer an extensive dealer network in America and familiar brands. Voila! A match made in heaven, or at least purgatory in the immediate vicinty of the pearly gates. As bad as Ford and GM's marketing may be at times, it surely can't be as bad as that for the "Geely Beauty Leopard":