Friday, November 21, 2008

China's plans to bailout Detroit

Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. . . . The paper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.”

A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he’s in deep trouble.

At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves.

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Is this what has finally become of the Bush/neocon/Republican Party dreams for America as the "world's lone superpower"?
- Langdon

Saturday, November 15, 2008

Vroom-Vro0m!! -- Detroit in crisis, no surprise

From my vantage point, what’s happening to Detroit is the culminationof a slowly developing car crash.

Anyone who’s read Keith Bradsher’s “High and Mighty,” a social history of the SUV, understands the broad coalition of groups – the companies, labor unions, federal and state politicians, suburban families, and others – who came together to resist building fuel efficient automobiles and push for big, heavy, profitable vehicles. Several of my students who’ve done internships at GM in recent years have come back with the same basic story. A good many top level managers were fully aware that corporate culture and the firm’s product line needed drastic reform to respond to the realities of peak oil and climate change. But in the middle layers or the organization, inertia prevailed. Equally disappointing from my students’ reports is the fact
that while young engineers recently graduated from the best engineering schools were aware of the pending energy crisis and the need for “sustainable technology,” their inclination was to keep designing vroom-vroom muscle cars, as if the power fantasies of the 1950s and 1960s were still the cool way to go.

Those who argue that a bailout of Detroit should revolutionize its “corporate culture” should include money for psychotherapy of the technical staff.

- Langdon