BAIC Wanting A Foothold In The West, Now Turns To Saab

November 30, 2009
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Last week, when we reported on the Koenigsegg Group's failed attempt to purchase Saab from GM, we mentioned that a member of that group -- Beijing Automotive Industry Corporation (BAIC) -- might make its own bid for the troubled Swedish brand. That was an educated guess, based largely on the fact that BAIC also made independent plays for Opel and Volvo. However, our suspicions may have been confirmed during a recent interview with BAIC's general manager, Wang Dazong. Asked about the possibility of BAIC going for Saab on its own, he replied "I would just say, 'stay tuned a little bit'". So maybe the fourth time's the charm.

Like fellow Chinese automaker Geely, BAIC is developing an aggressive gameplan for expansion into foreign markets. However, also like Geely, BAIC understands that building an empire on the backs of its own vehicles would be very slow going, given China's reputation for building small cars of dodgy quality that are little-known in the West. Taking over a foreign brand, however, is more like a turnkey operation, and that sort of rapid growth is attractive to BAIC. As Wang himself indicated,  "[W]e are a very dynamic and impatient people. We want to do things fast."

Hindering BAIC's speedy expansion (not to mention Geely's) are U.S. automakers' concerns about intellectual property rights. These have proven a major obstacle for Geely in its attempt to purchase Volvo from Ford, and IP issues prevented BAIC from reaching a deal with GM on Opel. Other events, like the unfortunately timed arrest of Yu Xiangdong, who's accused of stealing trade secrets from Ford and selling them to Chinese concerns, aren't helping matters.

This collision of Chinese impatience and American caution comes at a make-or-break time for Chinese automakers. At the moment, they're flush with cash, thanks to 45% growth in the Chinese auto market over the past year, due largely to government incentives on the purchase of fuel-efficient vehicles. Obviously, that sort of growth can't continue, but for now, the cash is burning a hole in China's pocket, and they're aiming to spend, spend, spend -- and frankly, the American auto industry (especially GM) could use China's money.

All of this leads to a complex series of questions: are Ford and GM willing to give up intellectual property rights in exchange for cold hard cash? If so, will the brand sales go through while China's auto industry is red-hot? And just as importantly, will the Chinese government allow companies like BAIC to complete the sales? As we've seen in the case of Hummer, Beijing can present substantial road blocks to corporate dealings.

There are also questions of posturing to consider. Some of Wang's statements make him sound like he's trying to affect a shade of gangster swagger: "For us, I don't see a need to buy a plant. I don't see a need to buy a building. I don't see a need to buy a robot. So what's left? You figure it out." Is that empty, 80s-style hubris, or will Wang & Co. be able to walk the walk? Or was the guy perhaps interviewed a cocktail party?


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