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In spite of the various problems confronted by the commercial vehicle market in China, major truck manufacturers in the world still considers this market as an important force for their future. As Jiangling Motors Coporation(JMC) officially acquired Taiyuan Chang’an Heavy Truck Co., Ltd (Taiyuan Heavy Truck), American automaker Ford finally established the plan of setting up its own heavy truck business in China.
The acquisition was closed on August 8 as JMC acquired all the stakes of Taiyuan Heavy Truck. After the acquisition, the new Taiyuan Heavy Truck became a fully-owned subsidiary company of JMC that has an independent legal representative qualification and will continues its current business of manufacturing heavy trucks and stuff.
Chen Yuanqing, president of JMC, said that presently negative increase is haunting the commercial vehicle market, especially the heavy truck industry. But the long-term infrastructure construction and economic growth in China will bring along the increasing demand for heavy trucks. So the total volume and development potential of this market are attractive enough for new entrants and companies with advantages. Wang Xigao, board chairman of JMC, said that JMC would introduce its new heavy trucks as quickly as possible after settling down this acquisition and improve the competitive power of current products of Taiyuan Heavy Truck in the market.
On August 8, JMC also signed a contract with the government of Taiyuan, Shanxi to build a new manufacturing base in this city to expand the heavy truck business.
Detoured Entry into China
It is noteworthy that JMC mentioned in the bulletin that the acquisition is fully supported by its major shareholder Ford. After the official signature of the agreement, JMC said that it would make use of Ford’s vast experiences and great technologies in the heavy truck field to form a production capacity of 50,000 heavy trucks and 50,000 engines in Taiyuan Heavy Truck in the next few years. It means that Ford will have an important step forward in getting established in the heavy truck market of China in the a detoured way through JMC’s acquisition of Taiyuan Heavy Truck.
The current Chinese heavy truck market sees numerous couples of foreign automakers and Chinese local companies. Through introducing products and technologies, foreign automakers cooperate with Chinese companies to take part in the competition in this market. This is an unchangeable trend of the industry. In recent years, Man, Daimler, Volvo and Navistar accelerated their pace into the Chinese market by establishing joint ventures in China, hoping to take “a better position in the competition” and “a wonderful share in the market”.
Yang Zaishun, a senior researcher of the heavy truck market in China, said that it was a shortcut for Ford to help the company whose stakes it holds to acquire Taiyuan Heavy Truck. This method not only got rid of the trouble caused by the additional examination and approval of the Chinese government if Chang’an Ford (a joint venture between China-based Chang’an Automotive and Ford) directly acquired this compa- ny, but also built a bridge quickly and conveniently for marching into the Chinese market.
According to Yang Zaishun, Ford once introduced its heavy truck Cargo into China through the distribution channel of JMC early in 2005. It also attempted to spread this product in China and even there is a saying that the Cargo would be localized in China in 2007 with the annual output of 30 thousand units. At that time Ford made several road tests for Cargo tractors and launched the tour display for this product in several areas. But no more information was heard from then on and it ended with the closure of JMC’s heavy truck department.
Cooperation among the Weak
Though it is widely believed that it is a part of Ford’s strategy to expand its power in China by improving the performance of heavy truck business and the profitability through JMC, some of the experts thought that it was too late for both JMC and Ford.
One of them is Li Ziliang, deputy director of the Automotive Research Center of Beijing Horizon Consultancy Group.
In Li Ziliang’s opinion, presently JMC is totally blank in technologies, distribution and supporting services of the heavy truck. It is very unlikely for this company to see impressive breakthroughs in a short while. As for Ford, this American company actually began to peel off its heavy truck business in the 1970s and now it only has a small portion of resources and a small market share. That means that it has no strong advantages in the field of heavy trucks. Therefore, both JMC and Ford will heavily rely on the resources they acquired from Taiyuan Heavy Truck.
“What’s more important is that the deal seemed to be a ‘combination’ pushed by the major shareholder, namely Ford. The acquisition somewhat happens out of JMC’s will. The joint venture related with complicated shareholding structure and third-party management will lead to the hardship in the future run-in. Presently, the heavy truck market is now highly concentrated and pose great difficulties for the latecomers to break through the barriers,” Li Ziliang said.
In China, the Top five heavy truck manufacturers are taking over 70% of the market. Therefore, the latecomers of the heavy truck market have to face rigorous requirements in talents, technologies, capital and channels. The JMC’s acquisition of Taiyuan Heavy Truck is like an alliance between the weak and thus is not blessed with a bright outlook.
After announcing the acquisition, the JMC’s stock dropped instead of increasing. A securities analysis institution said that the severe loss of Taiyuan Heavy Truck and the depression of the whole heavy truck industry intensified people’s worry about JMC’s outlook. The acquisition is definitely bad news for JMC’s financial performance in a short while, especially Taiyuan Heavy Truck was forecasted to suffer losses of 50 million yuan or more in 2012, which will have a 2%-3% negative influence on JMC’s profits.
Yang Zaishun also pointed out that JMC light truck business had a slowed growth in the first half of 2012 and its SUV business is not matured enough to become a power to be counted. All of its products are facing the bottleneck of transformation and upgrade. Getting into the depressive heavy truck market at this moment could not provide any improvement for its business. Therefore, whether Ford and JMC can bring Taiyuan Heavy Truck out of the lair of loss is the new lesson the two companies have to face in the Chinese market.
The acquisition was closed on August 8 as JMC acquired all the stakes of Taiyuan Heavy Truck. After the acquisition, the new Taiyuan Heavy Truck became a fully-owned subsidiary company of JMC that has an independent legal representative qualification and will continues its current business of manufacturing heavy trucks and stuff.
Chen Yuanqing, president of JMC, said that presently negative increase is haunting the commercial vehicle market, especially the heavy truck industry. But the long-term infrastructure construction and economic growth in China will bring along the increasing demand for heavy trucks. So the total volume and development potential of this market are attractive enough for new entrants and companies with advantages. Wang Xigao, board chairman of JMC, said that JMC would introduce its new heavy trucks as quickly as possible after settling down this acquisition and improve the competitive power of current products of Taiyuan Heavy Truck in the market.
On August 8, JMC also signed a contract with the government of Taiyuan, Shanxi to build a new manufacturing base in this city to expand the heavy truck business.
Detoured Entry into China
It is noteworthy that JMC mentioned in the bulletin that the acquisition is fully supported by its major shareholder Ford. After the official signature of the agreement, JMC said that it would make use of Ford’s vast experiences and great technologies in the heavy truck field to form a production capacity of 50,000 heavy trucks and 50,000 engines in Taiyuan Heavy Truck in the next few years. It means that Ford will have an important step forward in getting established in the heavy truck market of China in the a detoured way through JMC’s acquisition of Taiyuan Heavy Truck.
The current Chinese heavy truck market sees numerous couples of foreign automakers and Chinese local companies. Through introducing products and technologies, foreign automakers cooperate with Chinese companies to take part in the competition in this market. This is an unchangeable trend of the industry. In recent years, Man, Daimler, Volvo and Navistar accelerated their pace into the Chinese market by establishing joint ventures in China, hoping to take “a better position in the competition” and “a wonderful share in the market”.
Yang Zaishun, a senior researcher of the heavy truck market in China, said that it was a shortcut for Ford to help the company whose stakes it holds to acquire Taiyuan Heavy Truck. This method not only got rid of the trouble caused by the additional examination and approval of the Chinese government if Chang’an Ford (a joint venture between China-based Chang’an Automotive and Ford) directly acquired this compa- ny, but also built a bridge quickly and conveniently for marching into the Chinese market.
According to Yang Zaishun, Ford once introduced its heavy truck Cargo into China through the distribution channel of JMC early in 2005. It also attempted to spread this product in China and even there is a saying that the Cargo would be localized in China in 2007 with the annual output of 30 thousand units. At that time Ford made several road tests for Cargo tractors and launched the tour display for this product in several areas. But no more information was heard from then on and it ended with the closure of JMC’s heavy truck department.
Cooperation among the Weak
Though it is widely believed that it is a part of Ford’s strategy to expand its power in China by improving the performance of heavy truck business and the profitability through JMC, some of the experts thought that it was too late for both JMC and Ford.
One of them is Li Ziliang, deputy director of the Automotive Research Center of Beijing Horizon Consultancy Group.
In Li Ziliang’s opinion, presently JMC is totally blank in technologies, distribution and supporting services of the heavy truck. It is very unlikely for this company to see impressive breakthroughs in a short while. As for Ford, this American company actually began to peel off its heavy truck business in the 1970s and now it only has a small portion of resources and a small market share. That means that it has no strong advantages in the field of heavy trucks. Therefore, both JMC and Ford will heavily rely on the resources they acquired from Taiyuan Heavy Truck.
“What’s more important is that the deal seemed to be a ‘combination’ pushed by the major shareholder, namely Ford. The acquisition somewhat happens out of JMC’s will. The joint venture related with complicated shareholding structure and third-party management will lead to the hardship in the future run-in. Presently, the heavy truck market is now highly concentrated and pose great difficulties for the latecomers to break through the barriers,” Li Ziliang said.
In China, the Top five heavy truck manufacturers are taking over 70% of the market. Therefore, the latecomers of the heavy truck market have to face rigorous requirements in talents, technologies, capital and channels. The JMC’s acquisition of Taiyuan Heavy Truck is like an alliance between the weak and thus is not blessed with a bright outlook.
After announcing the acquisition, the JMC’s stock dropped instead of increasing. A securities analysis institution said that the severe loss of Taiyuan Heavy Truck and the depression of the whole heavy truck industry intensified people’s worry about JMC’s outlook. The acquisition is definitely bad news for JMC’s financial performance in a short while, especially Taiyuan Heavy Truck was forecasted to suffer losses of 50 million yuan or more in 2012, which will have a 2%-3% negative influence on JMC’s profits.
Yang Zaishun also pointed out that JMC light truck business had a slowed growth in the first half of 2012 and its SUV business is not matured enough to become a power to be counted. All of its products are facing the bottleneck of transformation and upgrade. Getting into the depressive heavy truck market at this moment could not provide any improvement for its business. Therefore, whether Ford and JMC can bring Taiyuan Heavy Truck out of the lair of loss is the new lesson the two companies have to face in the Chinese market.