Source： Germany Automobile Industry
Usually it takes quite a long period of time to change the image. Just like it took Audi many years to complete its change from “specialist for manufacturing automobiles for the old people” to “leader of new high-end automobiles”. However, the Chinese investors are showing to the world by their actions that they are making an exception: the monster called by people as “Red Dragon” only a few years ago is now becoming a real “White Knight”.
-Christoph Baeuchle-
The Chinese industry expert and consultant from Young&Ernst Ms. Sun Yi assured this new trend: “Chinese investors are no longer just pursuing something superficial, but some new shining points with core competence instead.” Under such circumstances, more and more foreign companies take the initiative to communicate with the investors from Asia and the number of overseas M&A cases has increased greatly. “The total amount of business in 2013 has already exceeded the sum of the last two years.” Sun explained.
Corresponding to this, the amount of China’s direct investment in Germany has also increased greatly. Between the 9 years from 2003 to 2011, the amount of China’s direct investment in Germany has jumped from 25,000,000 US dollars every year to 512,000,000 US dollars, of which the growth was more than 20 times. If it continues developing in this trend, according to the research report of Bertelsmann Foundation, the amount of investment will increase at the speed of 3 times every year and reach 2,100,000,000 US dollars in 2020. Many German companies hold positive attitude towards this kind of direct investment.
But only a few years ago, the situation of Chinese investors was totally different: some automobile manufacturers were very worried about that there might be some turmoil after their spare parts suppliers were acquired by Chinese investors. For example, many manufactures that use OEM production are worried that they may be influenced after Chinese investors acquiring their suppliers. However, such idea is also changing now.
For example, some manufactures express their warm welcome to the support from Asia. “About 20 suppliers which cooperate with BMW have achieved a very stable financial status with the help of Chinese investors and they can still keep self-management as always.” Klaus Draeger, the youngest Purchasing Director of BMW said.
For concerns about technology leakage, it still exists in many enterprises to some degree, but both parties have learned something from dealing with this problem. “The protection of technology in German companies is better and better. And meanwhile Chinese companies have realized that one to one forgery is far from enough.” Sun said.
Do not overlook the existing obstacles
According to a report issued by Ernst&Young last summer, Chinese enterprises have already become the 4th biggest investing group after the U.S.A., Switzerland and Great Britain. The main targets of investment are German machinery manufacturing enterprises (57%) and automobile manufacturing enterprises (42%). In the investment guide issued by China National Investment Institution, Germany is listed as a very important and with strong political orientation target investing country.
However, sometimes Chinese investors may be too reckless when entering the investing market. Ms. Sun expressed her concerns about this question well:” Most of the management doesn’t speak English, which leads to the problem that translation between two languages is needed when having a conference call. It takes a long time to get the authorization and approval from the country, and it takes a rather longer time to enter the joint development period after the Chinese and foreign parties reach an agreement. In addition, during the beginning period, cultural differences may lead to different thoughts and working attitudes.”
Saargummi and the Chinese investor Chongqing Light Industry & Textile (CQLT) have overcome various difficulties and finally reached cooperation in the early summer of 2011. With the entering of the Chinese enterprise, the sealing system manufacturer was barely saved from the edge of bankruptcy. “An investor with such rich assets like CQLT has provided us the biggest advantage in guaranteeing producing ability and staff employment.” Markus Wittmann, the general manager of Saargummi said. After the acquisition, the company was supported both in funds and operation.
After solving the problem of the enterprise’s survival, this sealing system manufacturing specialist again set their goal back on the expansion of the enterprise, “it becomes more easily for us to develop the Asian market on a deeper level after the acquisition.” Wittmann said, “Now we already have two factories in China, one in Chongqing and the other in Yantai. At the same time, we are planning to establish factories in Shenyang and other locations. India and Korea are also open for consideration.”
Mutual support
Under the background of internationalized automobile industry nowadays, lack of an international lineup will put automobile suppliers into a passive situation. The successful case of Saargummi has also been proved by other suppliers. “By the great market access of our parent company Joyson Group, we entered the Chinese market very quickly and efficiently. These measures taken by the parent company are like done by ourselves, or like the results which can be only achieved by the typical joint ventures before.” Michael Roesnick, the president of the German company Preh said. “Before this, Chinese market is all blank to us.”
This kind of support and help is mutual. This automobile interior specialist from Bad Neustadt in Unterfranken is also helping Joyson with its market expansion. “We provide internal support for each other and coordinate positively to develop every new market.” Roesnick said. Now Preh is helping the parent company entering North American and European market.
Supplier of automobile electronics Preh is currently manipulating the global automobile electronics activities of Joyson Group from its headquarters in Unterfranken. The location of main technology and R&D innovation is still in Bad Neustadt. “The management of Joyson is clearly aware that the mature R&D and innovation culture of Preh is the core competency of the whole enterprise.” Roesnick said.
Just like the case of Preh, Chinese buys prefer to retain the management of the German enterprise and avoid target on meddling in the daily production and management stuff at the beginning period after the acquisition. This is also approved by Karl Krause, the president of the board of directors of Kiekert AG:” The operating structure of our company hasn’t been changed after replacing the main shareholder.” This well-known professional automobile lock manufacturing company still keeps its self-management as always.
After contacting with a few other investing companies, the company hopes that they can again develop stably through the cooperation with North Lingyun Industrial Group Corporation. “An Asian investor who used to be specialized in industrial area and with strategic meaning is the first choice for Kiekert AG because Asia will be the promotion land of world automobile manufacturing industry in the future.” Krause stressed. Due to these factors, Kiekert finally achieved a M&A contract in March 2012 after two years’ efforts.
Now the company has again put the goal of expansion in front of the world. With the access of the Chinese investor, Kiekert AG can participate in the activities of developing Asian market more positively and mightily. The goal for the next step is:” We will at the same time establish or expand our factories in Central Europe and East Europe and get prepared for the next step of expanding in South America.”
