Targeting Foreign Small and Medium-sized Component Enterprises to Wait for the Opportunity of “Mining at the Bottom”

Affected by the international financial crisis, the world automobile industry in 2008 was severely damaged. Automobile production in the United States is about 10 million vehicles, down by about 40% year-on-year; passenger cars in Europe are reversing to 15% from 2% to 3%; commercial vehicles are down 30% to 40%; Toyota and Honda, Japan The operating performance of the company fell sharply and faced great pressure for losses. It was alleged that Japan’s auto industry had been regressed for 30 years.

The impact of the financial crisis is still spreading and spreading throughout the world. The industry is pessimistic about the prospects of the auto market in the next two years. The economic recession led to an increase in the unemployment rate and the decline in auto purchasing power. The auto companies' poor liquidity and difficulty in financing caused the business to be in trouble and adjusted or postponed the original strategic expansion plans. Some companies faced restructuring or mergers and acquisitions; some companies were The non-core technology that will obtain the funds to sell the products will sell or disappear. It can be predicted that the world auto industry will undergo major adjustments and changes during this period.

Relatively speaking, China's auto industry is "good for the scenery." Because China's auto market is not highly dependent on foreign markets, domestic real market purchasing power is not supported by loans. Coupled with China's strong financial strength and stable financial system, there will be no subversive consequences. A few days ago, the State Council introduced the “Rejuvenation Plan for the Automotive Industry” and launched a very specific stimulus policy for car consumption. This series of favorable factors has given us confidence that China's auto industry will still maintain a certain growth rate.

According to the current situation of the foreign automobile industry, some people advocated taking the opportunity to go abroad for "bottom-bottoming." If we can boldly go out and actively cooperate with foreign companies that have technology, management, and market, it will be important for us to quickly improve our existing product quality and technological level, narrow the gap with foreign countries, and realize leapfrog development. effect. The so-called cooperation can be technical or capital-based mergers and acquisitions. Overall, this is indeed a historical opportunity for China's auto industry to produce its own brand.

However, careful analysis, "bottom-hunting" may not be suitable for all companies, for some companies is an opportunity, and some companies may be the risk. On the one hand, enterprises must have sufficient financial strength. On the other hand, they must have talented people who manage internationally. At the same time, they must also have a deep understanding of the actual situation of the target of mergers and acquisitions and ensure that they have the ability to bring the merged and acquired enterprises into normal operation.

To be realistic and realistic, most companies in China still lack the quality and experience of international operations, especially for parts and components companies, and the risk of foreign mergers and acquisitions is relatively large. Therefore, it is prudent to go abroad to “bottom the bargain” and choose the right M&A target based on one’s own strength.

The purpose of our “bargain-hunting” abroad is mainly to obtain advanced technology. While large foreign companies have key assembly technologies, their core technologies are not easily transferred. M&As are generally backward non-core technology products and Enterprises, and the cost of mergers and acquisitions is too great. I believe that foreign SMEs should arouse our attention. China's spare parts companies and foreign small and medium-sized component companies have broad prospects for cooperation. They have advanced product technology and solid, superb technology, as well as brand and supporting channels, and the equipment is versatile and has many product specifications. These companies are willing to be acquired for various reasons.

A component company with a certain strength in China can choose good targets for mergers and acquisitions according to its own needs. Through mergers and acquisitions of foreign companies, we must do a good job of digestion, absorption, and transfer of technology to achieve the inheritance and innovation of technology and take root in China.

As for the duration of the international financial crisis and its impact on the real economy, it remains to be seen. We must assess the situation, seize the opportunity, strengthen cooperation with foreign countries, use it for my own purposes, and accelerate the improvement of the overall level of China's auto parts and components. (The author of this column is Deputy Secretary-General of China Automobile Industry Association)