China Auto Parts Firms Buying U.S. Counterparts
China is tapping into faltering firms for market access -- and saving jobs in the process.
In what’s shaping up to be a win-win situation, China’s auto parts makers are gobbling up U.S. auto parts manufacturers that are struggling or near bankruptcy in the wake of the recession.
Buying auto parts makers in the U.S. is a way for Chinese firms to get a piece of the auto action here at near-bargain-basement prices. Meanwhile, the acquisitions preserve jobs and bolster the economies of many Midwestern states.
Moreover, the influx of Chinese cash will enable acquired U.S. auto parts companies to increase R&D spending so they can become more competitive.
The Chinese companies could easily build their own auto parts manufacturing plants in the U.S. But going down the acquisition road offers big advantages.
“They’re buying not just a plant, but the companies’ distribution networks in the U.S., Canada and Mexico, along with the technologies and manufacturing know-how to make products sought by many customers,” says C. Peter Theut, president and CEO of China Bridge, in Ann Arbor, Mich. His firm advises U.S. businesses on setting up operations in China, as well as Chinese firms seeking footholds in the U.S. market.
It’s a strategic move, too, that recognizes rising Chinese labor costs and ocean shipping charges are bound to make products made in that country less competitive over time, says David Cole, chairman of the Center for Automotive Research, an auto industry consultancy.
In recent months, Pacific Century Motors acquired General Motors’ Nexteer steering unit for $500 million. The acquisition came a year after the automaker bought it from beleaguered supplier Delphi Automotive to assure that production there wouldn’t end. And BeijingWest Industries bought Delphi’s brake manufacturing division for around $100 million.
Among other China-based firms involved in acquisitions in the U.S.: Wanxiang America, which makes chassis components; Tempo International Group, a manufacturer of brakes, chassis and power trains; and automakers FAW Group and Shanghai Automotive Industry Corp.