Tags: china | trump | auto parts makers | america first

China Buys Auto Parts Makers as Trump's 'America First' Era Looms

Image: China Buys Auto Parts Makers as Trump's 'America First' Era Looms

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Tuesday, 14 Feb 2017 07:28 AM

Chinese companies started talking a decade ago about cracking the U.S. auto market with an array of low-cost passenger vehicles. That hasn’t happened, so instead they’re getting under the hoods of American cars by buying up parts makers at a record pace.

Ningbo Joyson Electronic Corp. supplies windshield-washer and ventilation systems to some of the world’s biggest carmakers, including Ford Motor Co., General Motors Co. and Volkswagen AG. Last year, it spent more than $1 billion buying a Michigan maker of air bags and an Indiana manufacturer of assembly-line equipment.

Now, it’s on track for potentially the biggest deal yet -- using a subsidiary to bid for beleaguered air-bag maker Takata Corp. and further entrench itself in chassis sold to U.S. drivers. The deal would continue an aggressive strategy that put Ningbo Joyson at the forefront of a record $1.6 billion in investments in U.S. companies by Chinese parts makers last year seeking global supply-chain access to compensate for a maturing home market.

“We’re just at the very outset of a major trend that will run over the next five to 10 years,” said Michael Dunne, president of Hong Kong-based consultancy Dunne Automotive. “If the original game plan was to export from China, now it’s clear that they will be expected to invest and create jobs in the U.S.”

There were at least seven announced auto-related deals in the U.S. involving Chinese companies last year, with the total announced value eclipsing the previous record set in 2014, according to data compiled by Bloomberg.

Key Safety

The largest was Joyson’s $920 million purchase of Key Safety Systems Inc., a maker of air-bag modules with U.S. factories in Alabama, Florida and Tennessee. The company has about 13,000 employees in 14 countries.

The Sterling Heights, Michigan-based company declined to comment.

Key Safety now is the preferred bidder for Tokyo-based Takata, which agreed to pay $1 billion to U.S. regulators, consumers and carmakers after its faulty air bags were linked to at least 17 deaths worldwide. Still, the U.S. is Takata’s biggest market, accounting for about 41 percent of its revenue in the fiscal year ended March 2016.

Takata is aiming to sign an agreement with the successful bidder by early March, according to people familiar with the matter who asked not to be identified because the discussions are private.

Last year’s deals also include Tibet Yinyi Investment Management Co. buying ARC Automotive, a manufacturer of air-bag inflators from Knoxville, Tennessee, for $491.2 million, according to data compiled by Bloomberg. And on Dec. 30, ZYNP Corp. of Mengzhou, China, announced it was acquiring powertrain maker Incodel Holding LLC in Michigan for $101.2 million.

“Chinese companies have built up good relationships with major global automakers in China, so it’s quite natural for them to expand overseas,” said Michael Yu, a Deloitte China partner in Shanghai.

The spending could help Chinese companies gain footholds in the U.S. at a time of simmering tensions between the two nations. President Trump is threatening tariffs on Chinese-made products, and he triggered a spat with China’s government by speaking with Taiwan’s president.

The Chinese also failed to deliver on proclamations dating to 2005 to sell their own brands in U.S. showrooms, as the Japanese and Koreans did with Toyotas and Hyundais. The latest plan comes from Guangzhou Automobile Group Co., which will open a U.S. research-and-development center this year and export cars to American showrooms as early as 2018, President Feng Xingya said. Shares reached a 52-week high in Hong Kong on Tuesday, and they have gained 38 percent this year.

Slowing Economy

The Chinese also are seeding their own U.S. operations. Qingdao Sentury Tire Co. agreed in September to invest $530 million in a new factory in LaGrange, Georgia, according to a statement by the Chinese company’s U.S. subsidiary. The plant is set to open next year with more than 1,000 employees.

Fuyao Glass Industry Group Co., a manufacturer from Fujian province that supplies Ford, GM and Toyota, is spending $1 billion to expand in the U.S., a company spokesman said Feb. 10. The investments include factories in Moraine, Ohio, and Mount Zion, Illinois.

The manufacturers are looking abroad to help reduce their dependence on China. The world’s second-largest economy is slowing, with gross domestic product likely to grow 6.5 percent this year, Bloomberg economist surveys show. That would be the lowest since 1990, according to data compiled by Bloomberg.

Auto sales growth will retreat to 5 percent this year from almost 14 percent last year, after the government scaled back a tax cut and economic growth weakens, according to the China Association of Automobile Manufacturers. Major cities imposed ownership restrictions to ease traffic congestion, and President Xi Jinping’s government is trying to find ways to combat the choking smog plaguing the nation.

Domestic automakers also trail overseas peers in quality, according to a study by J.D. Power released in September, with marques such as Hyundai, Kia, Honda and Audi outperforming local rivals.

The overseas investments may help Chinese manufacturers learn more-advanced production processes, said Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence.

“It’s all about the technology,” he said. “These components are hard to make and Chinese manufacturers are not there yet. If they were to do it all themselves, it would take them years to figure out.”

© Copyright 2017 Bloomberg News. All rights reserved.

 
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Chinese companies started talking a decade ago about cracking the U.S. auto market with an array of low-cost passenger vehicles. That hasn't happened, so instead they're getting under the hoods of American cars by buying up parts makers at a record pace.Ningbo Joyson...
china, trump, auto parts makers, america first
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2017-28-14
Tuesday, 14 Feb 2017 07:28 AM
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