North America: survival of components

　　The leading position of the U.S. market in the global auto market in terms of the sales scale was completely overturned. In the current round of crisis, the U.S. car enterprises were injured deepest. GM has been forced to sell out many shares and assets purchased in the early years, including Fiat, Isuzu, Suzuki and FHI as well as recently, the Saab. After sold out Land Rover and Jaguar purchased over the previous years Ford is now looking for the Volvo buyers.

　　To some extent, it demonstrates the risks of large-scale acquisitions of U.S. car enterprises. In 2007, Daimler Group sold out Chrysler brand that had purchased by large capitals at a loss. Meanwhile, the operations of Ford’s self-built subsidiary in Europe are more stable and successful than that of Opel, which GM purchased as its European subsidiary.

　　It is not difficult to discover that there have seldom been cross-border successful mergers and acquisitions in the passenger area, especially cross-continental mergers and acquisitions. Acquisitions often begin with great confidence while end up with sellout at huge losses. These facts were repeatedly reminded the later comers to choose the suitable expansion model.

　　In this round of economic crisis, the auto parts manufacturing industry also suffered greatest shock no matter in the U.S., Europe or Japan. Parts suppliers in the key areas experienced so serious cash flow problems due to sharp drop in sales that a number of companies have filed for bankruptcy protection or been acquired.

　　According to the survey of Gasoo website, more than 86.7% of experts surveyed believe that the plight of the North American parts suppliers will still be extended one to two years, during when more than 30% of the suppliers may go bankrupt reorganization. The wave of integrating acquisitions among parts suppliers is inevitable.

　　February 22, Tin Manganello CEO of Borg Warner told the reporter in an interview that since 2000, Borg Warner’s business in North America began to shrink. In 10 years the declining rate topped 60%. Especially last year, because of financial crisis, there are few profitable parts companies in North America.

　　There are three main reasons why the survival of North American auto parts companies is harder that auto manufacturers: the direct supports from U.S. government to the auto manufacturers are greater. In negotiations, Parts enterprises are often confronted with powerful upstream and downstream business, resulting in more intense financing chain. For example, it is often the case that downstream auto plant requires a six-month period of the accounts while the upstream suppliers of raw materials demands payment before delivery. The bankruptcy protection of GM and Chrysler may bring about more uncollectible debts or longer cycles which also affected the cash flow. From the above three aspects, the survival of North American auto parts supplier will be even harder as overall auto market has not revived. The reorganizations may increase. The situation is expected to turn better fundamentally after the year of 2011.

　　Tin Manganello told the reporter this professional auto Parts Company based with three key technologies of engine, gearbox and all-wheel-drive system is one of the few U.S. companies with healthy financial status. There is cash flow growth every month. Besides, the bond issued o has been assessed to be investment grade. However, the main growth of Borg Warner comes from Asia, especially Chinese market.

　　(Translator: yalong/ Jessie)

　　See original Chinese report Please click: http://auto.sohu.com/20100324/n271049500.shtml