AFX News Limited
UK's MG Rover too expensive for China Geely Group - analysts
06.20.2005, 01:08 AM

BEIJING (AFX) - Ailing MG Rover is still too expensive for the Chinese auto maker Geely Group, which will have problems finding funds should it bid to buy the UK automaker.

State media reported earlier that Geely is in talks to buy MG Rover, after its counterpart Shanghai Automotive Industry Corp pulled out of a potential rescue deal in April.

'We are in talks with Rover', said Li Shufu in an interview with the Beijing Times last week.

'The price they asked for is much lower than that for Shanghai Automotive Industry Corp before', Li added.

In April, Shanghai Automotive Industry Corp wrote to the British government to say it will 'play no further part' in a rescue deal to save the ailing car giant.

Officials with Geely Auto declined to comment.

Hu Song, an analyst with Haitong Securities Co Ltd said Geely's fund shortages will be its main hurdle to buying MG Rover.

'Yearly profit from Geely's auto business does not exceed 200 mln yuan. Furthermore Geely has just finished buying shares in its Hong Kong-listed subsidiary, Geely Automobile Holdings for 153 mln yuan funded by bank loans,' Hu said.

Hu did not say how Geely could afford the acquisition.

However, Jia Xinguang, an analyst with the China National Automotive Industry Consulting and Development Corp said he thinks the plan is feasible if Geely can raise enough funds through bank loans, for instance.

'According to what I know, it is MG Rover who contacted Geely first,' Jia said.

'Should the acquisition go ahead, it will be an opportunity for Geely to upgrade its technology and management,' Jia added.

He said Geely's brand image would benefit from the deal

Interesting .... MG Rover had over 20 approaches from Chinese companies following the failure of the Brilliance agreement. During Spring 2004, they whittled these down to 3/4 key players. I understand that Geely was one of these frontrunners but MGR ultimately chose to go with SAIC. The rest is history ....

 

'Should the acquisition go ahead, it will be an opportunity for Geely to upgrade its technology and management,' Jia added.

Is this Chinese humour?

 

Geely interested in MG Rover??

Business News »
Time is GMT + 8 hours
Posted: 20 June 2005 1630 hrs

Chinese auto maker Geely in talks to buy Britain's MG Rover: reports

BEIJING : Chinese auto maker Geely Group is in talks with MG Rover to buy the collapsed British car manufacturer, state media reported.

This would mark the second attempt by MG Rover to find a Chinese rescuer following a decision by Shanghai Automotive Industry Corp (SAIC) to pull out of a potential deal in April.

"After SAIC announced it had pulled out of the deal, Rover took the initiative to contact us," Geely chairman Li Shufu was quoted as saying by the Dongfang Daily.

"Our biggest interest is in Rover's mature technology, which is a considerable attraction for Geely in its current stage of rapid development," he said, according to the newspaper.

MG Rover went out of business and laid off virtually all its 6,000-plus employees after the hoped-for takeover by SAIC failed to come through earlier this year.

Local media have given little indication of the price of a possible purchase of MG Rover by Geely other than saying that the new prospective Chinese buyer may get it for less than what SAIC was offered.

"The price MG Rover asked for is much lower than that for SAIC before," Li said in an earlier interview with the Beijing Times.

Geely, which is listed in Hong Kong, is one of China's better-known car brands and is increasingly placing its focus on export markets, recently earmarking Malaysia as the hub for its Southeast Asian operations.

Geely could not immediately be reached for comment Monday.

MG Rover, famous for its renowned models such as the Mini and the Land Rover, had been teetering on the edge of bankruptcy since it was sold four years ago by Germany's BMW to four businessmen in central England.

- AFP

 

Interesting news. I was thinking that Geely Group could be the third bidder for the whole businness, mentioned from PWC, but I'm not so sure about that.. we must investigate a bit more about that company.

Here below is a link where you can get informations about the Geely Group. At the top of the page, there is the link to their web site. I don't know if the infos about the company are updated or not, but the President is mr. Li Shufu, the same person reported on that article:

http://www.omnieast.com/auto/geely.htm

"The price they asked for is much lower than that for Shanghai Automotive Industry Corp before', Li added."

I would like to know how much was that price.

"In April, Shanghai Automotive Industry Corp wrote to the British government to say it will 'play no further part' in a rescue deal to save the ailing car giant"

Maybe I was right when few days ago I wrote it could be SAIC got tired about the "game" with the MGR managers, and expecially with the U.K. Govt.. I always remember that words reported from the Press, regarding P. Hewitt: "we can't give you the £100m loan, until the deal is signed". :irked:

Sad to see how even a not so big chinese company like that, is looking to buy the last big and famous U.K. car manufacturer, while there is no one bidder from U.K. or even from EU for the whole business, and the Gov. would seem to be sleeping. :sad3:

 

Could also emerge as a partner for some of the other bidders...

 

To be quite honest, I've had quite enough of the Chinese and their duplicitous business practices.

This mess mightn't be of their making to start with (BMW, mismanagement and the 'great British public') must surely have played a large part in that), but the final straw certainly was. SAIC never intended to complete their JV deal - that much is now apparent.

Let them go back to making cheap plastic toys. I don't want any Chinese involvement in whatever might become of MG Rover.

 

Two more articles from todays overseas Press

I have just found out these ones:


FROM: Channel News Asia - MediaCorp News
-------------------------------------------
Chinese auto maker Geely in talks to buy Britain's MG Rover

Time is GMT + 8 hours
Posted: 20 June 2005 1630 hrs

BEIJING : China's biggest private automaker Geely Group said it is in talks with MG Rover to buy the collapsed British car manufacturer but analysts argued it will have problems finding sufficient funds to secure a purchase.

"We are indeed in touch with Rover," a spokesman for Geely told AFP on Monday. "We're both interested but I don't know when we'll complete the talks, or what we might eventually end up buying."

This marks the second attempt by MG Rover, Britain's last high volume car maker, to find a Chinese rescuer following a decision by Shanghai Automotive Industry Corp (SAIC) to abandon a potential deal in April.

SAIC withdrew because of worries about the financial health of Phoenix Venture Holdings, the owner of MG Rover, earlier state media reports said.

"After SAIC announced it had pulled out of the deal, Rover took the initiative to contact us," Geely chairman Li Shufu was quoted as saying by the Dongfang Daily on Monday.

"Our biggest interest is in Rover's mature technology, which is a considerable attraction for Geely in its current stage of rapid development," he said.

Geely is not the first company in China to express such an interest. SAIC previously bought the patents for the Rover 25 and 75 models.

MG Rover went out of business and laid off virtually all its 6,000-plus employees after the hoped-for takeover by SAIC failed to come through.

The British car maker -- once famous for models such as the Mini and the Land Rover -- had been teetering on the edge of bankruptcy since it was sold four years ago by Germany's BMW to four businessmen in central England.

Hong Kong-listed Geely reflects China's growing power and confidence in automobile manufacturing.

It is one of China's better-known car brands and is increasingly placing its focus on export markets, recently earmarking Malaysia as the hub for its Southeast Asian operations.

Local media have given little indication of the price for a possible purchase of MG Rover by Geely other than saying that it may get it for less than what SAIC was asked for.

"The price MG Rover asked for is much lower than that for SAIC before," chairman Li said in an earlier interview with the Beijing Times.

Even so, MG Rover may eventually be too expensive for the Chinese auto maker, who will have problems finding funds should it make a bid.

"Yearly profit from Geely's auto business does not exceed 200 million yuan (24 million dollars)," said Hu Song, an analyst with Haitong Securities.

"Furthermore Geely has just finished buying shares in its Hong Kong-listed subsidiary, Geely Automobile Holdings, for 153 million yuan (18 million dollars) funded by bank loans."

However, Jia Xinguang, an analyst with the China National Automotive Industry Consulting and Development Corp said the plan was feasible if Geely could raise enough funds through bank loans.

"Should the acquisition go ahead, it will be an opportunity for Geely to upgrade its technology and management," Jia added.
----------------------------------------

Here is the link: http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/153694/1/.html



FROM: Yahoo News (DE)
-----------------------
Chinas Autobauer Geely führt Gespräche über Rover-Kauf

Peking (AFP) - Für die Übernahme des zusammengebrochenen britischen Autobauers MG Rover gibt es nach chinesischen Presseberichten einen neuen Interessenten. Der Chef des chinesischen Herstellers Geely Group, Li Shufu, sagte der Zeitung "Dongfang Daily" (Montagausgabe), Rover habe mit seinem Unternehmen Kontakt aufgenommen. "Unser größtes Interesse an Rover ist ausgereifte Technologie." Sie biete für Geely in der aktuellen Phase seiner Geschäftsentwicklung "einen beträchtlichen Reiz". MG Rover als letzter großer unabhängiger Autoproduzent Großbritanniens hatte Mitte April Insolvenz anmelden müssen. Zuvor hatte der chinesische Autobauer Shanghai Automotive Industry Corp. (SAIC) einen Einstieg endgültig abgelehnt.
-------------------------

Here is the link: http://de.news.yahoo.com/050620/286/4l4ip.html

 

Just found another article, this one came from Iran. Nothing special, but interesting to know the Press of many different Countries is writing about that new.

Did you noticed, until now the "bad" Title of the articles came from the U.K. Press?


FROM: Iran Daily
----------------
Chinese Group Planning Rover Purchase

Tue, Jun 21, 2005


BEIJING, June 20--Chinese auto maker Geely Group is in talks with MG Rover to buy the collapsed British car manufacturer, state media reported Monday, AFP reported.

This would mark the second attempt by MG Rover to find a Chinese rescuer following a decision by Shanghai Automotive Industry Corp (SAIC) to pull out of a potential deal in April.

"After SAIC announced it had pulled out of the deal, Rover took the initiative to contact us," Geely chairman Li Shufu was quoted as saying by the Dongfang Daily.

"Our biggest interest is in Rover's mature technology, which is a considerable attraction for Geely in its current stage of rapid development," he said, according to the newspaper.

MG Rover went out of business and laid off virtually all its 6,000-plus employees after the hoped-for takeover by SAIC failed to come through earlier this year.

Local media have given little indication of the price of a possible purchase of MG Rover by Geely other than saying that the new prospective Chinese buyer may get it for less than what SAIC was offered.

"The price MG Rover asked for is much lower than that for SAIC before," Li said in an earlier interview with the Beijing Times.

Geely, which is listed in Hong Kong, is one of China's better-known car brands and is increasingly placing its focus on export markets, recently earmarking Malaysia as the hub for its Southeast Asian operations. Geely could not immediately be reached for comment Monday.

MG Rover, famous for its renowned models such as the Mini and the Land Rover, had been teetering on the edge of bankruptcy since it was sold four years ago by Germany's BMW to four businessmen in central England.
---------------------------------------

Here is the link (it's to the bottom): http://www.iran-daily.com/1384/2304/html/ieconomy.htm#70599

 

I know Geely - I've bought some of their products and met some of their managers in the past.

Their technology is fairly basic and their build quality of some of their current products are not brilliant - but then they're not the worst in the pack either. Quality control procedures for a lot of Chinese manufacturers appear to be "If we ship this, will we get away with it?". If the answer is "probably" then it passes.

To be fair, they are not alone, and much of it is down to the way Chinese manufacturers treat their workforce: these companies offer no perks, such as holidays or pensions, and pretends to pay the employees. In return the employees pretend to work. Its a very different concept to manufacturing in Europe, and is one of the reason Chinese products appear to be very cheap: quality control is not included.

Wise man once say: "There is always someone who can build a lower quality product at a lower price. The customer who looks only at price is this persons rightful prey."

 

To be fair, they are not alone, and much of it is down to the way Chinese manufacturers treat their workforce: these companies offer no perks, such as holidays or pensions, and pretends to pay the employees. In return the employees pretend to work. Its a very different concept to manufacturing in Europe, and is one of the reason Chinese products appear to be very cheap: quality control is not included.

boxwellm, I agree with you on that. Last week I saw a long programme on the italian tv RAI channel about the chinese workes and firms.

 

I was told an interesting little snippet of news over the weekend by someone who used to work in the auto industry (and had seen an old pal of his during the week....initals JT ).
This chap reckons that there are only 2 bids being seriously considered for the whole company. One is Iranian, the other.................Indian!

 

Indian? Tata, Sonalika or someone else?

Tata could benefit hugely from owning Rover. Ratan Tata appears to have ambitions for world domination and owning Rover could be a big step in the right direction.

According to an article in the trade press recently, Tata's quality control issues are going away as the quality of their products get better and better. The product fit between Tata and Rover is good - i.e. no overlap whatsoever, and Tata has already proved they can get products to market quickly and efficiently. They also understand platform sharing as well, which is no bad thing. Perhaps the next generation Indica could spawn a replacement for the 25, the ZR, the Streetwise and an MG Midget. Remember, Tata showed a sporty, modern 2-seat roadster concept back in 2000 based on the Indica platform...

 

I must admit, Mike, that I was a little suprised, but this chap had been speaking to JT and that's what he was (apparently) told.

 

This could be very interesting, JT would know who the prefered bidders are because PWC are working for him.

 

Well lets just hope it all gets sorted out before i go on holiday, i dont want to miss anything

 

Well lets just hope it all gets sorted out before i go on holiday, i dont want to miss anything

Some days ago, I read on the Press, the U.K. Gov. wants that all gets sorted out by the end of this month!

 

Geely Down 2.9%; Rover Buy Unlikely

Tuesday, June 21, 2005 11:04:45 PM ET
Dow Jones Newswires

1050 [Dow Jones] Geely Auto (0175.HK) down 2.9% at 49.5 HK cents on light volume of HK$1.59 million, perhaps due to some concerns about MG Rover buy talk. Asian house analyst says chances of deal happening "not high" as Geely would have to gear up. Geely ED Lawrence Ang also reportedly denied buy talk, quoted by Oriental Daily as saying Geely only interested in "certain assets which could improve Geely's technological know-how". As such, stock unlikely to edge lower.(RLI)

 

I know Geely - I've bought some of their products and met some of their managers in the past.

What products have you bought Mike? Wasn't it Geely that were producing a 4x4 that was a blatant rip off of the Honda CRV? Or was it Chery? Can't remember.

I think Tata could be a good fit. IIRC, their name was in the frame back in 2000 during the BMW split. Depends on what rights remain to build the current models.

 

I was told an interesting little snippet of news over the weekend by someone who used to work in the auto industry (and had seen an old pal of his during the week....initals JT ).
This chap reckons that there are only 2 bids being seriously considered for the whole company. One is Iranian, the other.................Indian!

It could be wrong information though. PwC could be telling JT what they want him to hear (maybe they don'twant him to meddle?). JT could have gleaned only some of the information (surly pwC should be keeping this confidential), or it could be deliberate misinformation that JT is involved in.

Think about it. PwC (and PVH?) want to keep the Chinese at arms length and draw the Iranians and Indians in so they commit themselves in a way that means they will work with whoever else gets the main bid. Just a theory...

 

Did anyone see last week's issue of US News and World Report? They had a big feature on the ascendance of China as a world power and included a few articles on the dangers of doing business there, also had a report on pirateing of intellectual property. The tone of some of their business analysts was that the lack of protection for patents and trademarks was one of the biggest stumbling blocks Chinese companies could hit when attempting to expand globally.

It is somewhat reassuring to know that MG Rover aren't the only ones to get shafted in that manner, it must really be widespread for a major news magazine to devote so much coverage to it, although MGR wasn't mentioned once. I wonder if the Chinese use booze on every foreign executive, or was that a one-time deal.

 

Geely bids for MG Rover leftovers

Geely bids for MG Rover

www.chinaview.cn 2005-06-23 09:02:26


BEIJING, June 23 -- Privately-owned Chinese mainland car-maker Geely Automobile yesterday said it is in talks to buy British collapsed automaker MG Rover's moulds and production equipment business, and intends to build cars in Hong Kong.

Hong Kong-listed Geely and MG Rover held negotiations on the moulds and production equipment business in April, Geely said.

"Negotiations are at a preliminary stage and not related to a merger of equity shares of MG Rover," Geely said.

Geely and MG Rover started to negotiate plans to form a joint venture several years ago, but talks were suspended in the middle of 2004.

Shanghai Automotive Industry Corp, one of China's top State-owned car-makers, withdrew from talks to merge MG Rover in April.

Also yesterday, Geely and Hong Kong Productivity Council - a government-sponsored organization aiming to promote increased productivity throughout Hong Kong business sectors - signed a memorandum of understanding to collaborate in the development of the first made-in-Hong Kong car, and concerning automotive components.

The car will be a mid-to-high-range model, Geely said.

The two sides will establish an auto parts research and development centre at the end of this year in Hong Kong, which will be joined by Hong Kong manufacturers, it said.

But Geely has not revealed investment in the auto project in Hong Kong.

"Upon successful implementation of this project, we will look into the possibility of producing this new model in Hong Kong for export overseas, or leveraging on the CEPA advantages, to introduce to the mainland market," said Andrew Leung, chairman of the Hong Kong Productivity Council.

CEPA, or Closer Economic Partnership Arrangement, started last year to facilitate Hong Kong's exports to and investment in the mainland.

Li Shufu, chairman of Geely, said the Hong Kong auto project would help the company explore more opportunities in the international auto market.

Song Bingshen, an analyst with Guotai & Jun'an Securities Co Ltd, said: "There seems to be synergies between Geely's talks with MG Rover and its auto development project in Hong Kong."

"If Geely gets MG Rover's moulds and production equipment, it is likely to move them to Hong Kong to develop and build the planned mid-to-high-range car," Song said yesterday.

MG Rover's moulds and production equipment will be very helpful for Geely, a manufacturer of cheap cars which needs to move upwards in product portfolios to expand its profit margins and have a better public image, he said.

Geely, 60.68 per cent owned by Li, is producing compact cars in East China's Zhejiang Province and Shanghai.

However, other analysts don't think highly of Geely's auto project in Hong Kong.

Yale Zhang, the Shanghai-based analyst with US auto industry consultancy CSM Worldwide Corp, said: "I cannot understand why Geely wants to make cars in Hong Kong as the auto market is tiny and costs are much higher there than in the mainland.

"On the other hand, I wonder whether Geely could have enough cash to buy MG Rover's moulds and production equipment according to its current profit-earning ability."

Geely's existing products include Haoqing, Merrie, Ulion, Freedom Cruiser, Maple and Beauty Leopard, most of which retail for between 30,000 yuan (US$3,623) and 80,000 yuan (US$9,662).

Geely's sales grew by 23.3 per cent year-on-year to 53,710 cars in the first five months of this year, said an official of the company.

The company said earlier that it expects to sell 150,000 cars in total this year, up from 100,000 units last year.

Its exports rocketed by 150 per cent to more than 3,000 cars in the period.

Geely aims to double its exports to 10,000 cars this year from last year.

At the end of last month, Geely clinched a deal with a Malaysian partner to assemble its cars in the Southeast Asian nation.

Production in Malaysia will start later this year with components shipped from China and will reach 30,000 cars next year.

Geely, once a motorcycle and real estate conglomerate, started to produce cars in 1998. It closed at 51 HK cents (6.56 US cents) per share yesterday, up 2 per cent. (Source: China Daily)