Automotive Integration: It Is Hard to Integrate Market Will and Government Will

On the eve of the Spring Festival, the Industrial Policy Department of the Ministry of Industry and Information Technology issued the "Guidance Opinions on Accelerating the Promotion of M&A and Restructuring in Key Industries" issued jointly by the Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Finance, and other 12 member organizations of the State Council's Inter-ministerial Coordination Group for Promoting Enterprise M&A. ")) The main objectives and key tasks for the merger and reorganization of the nine industries and fields such as automobiles, steel and cement are presented.

As a matter of fact, as early as March 2009, the "Auto Industry Adjustment and Revitalization Plan" (hereinafter referred to as the "Planning") has proposed the formation of two or three large-scale enterprise groups with a production and sales scale of over 2 million vehicles through mergers and reorganizations. In order to cultivate 4 to 5 automobile enterprise groups with a production and sales scale of over 1 million units, the number of auto enterprise groups with a production and sales scale of more than 90% of the market share was reduced from 14 at the time to less than 10 companies. However, the implementation of this policy was not satisfactory and even suffered criticism.

Today, the Ministry of Industry and Information Technology has again issued a document to promote the merger and reorganization of the automotive industry. What will be the effect? The obvious answer is that mergers and restructuring of the automobile industry driven by policies will remain difficult in the face of complex local interest relationships and the current operating mechanism of auto companies.

"Opinions" have made progress

Those who have carefully read the full text of the "Opinions" are not difficult to find that this New Deal is different from the past merger and reorganization policies of the auto industry and is more reasonable and realistic than the "Plan".

"Planning" mentioned that large-scale auto companies such as FAW, Dongfeng, SAIC, and Changan are encouraged to implement mergers and reorganizations nationwide; and auto companies such as BAIC, GAC, Chery, and CNHTC shall implement regional mergers and acquisitions. This idea has been criticized by the industry as the "Four Big Four" model for merger and reorganization of the automotive industry. The “Opinions” of this time set the goal: By 2015, the industry concentration of the top 10 vehicle manufacturers will reach 90%, forming 3 to 5 large-scale automobile enterprise groups with core competitiveness.

“When formulating national standards for the industry, we can only mention performance requirements, and should not mention structural requirements. This is also true for mergers and reorganizations. We can mention specific requirements such as the size of the company and its core competitiveness, rather than restricting certain companies.” Tan Xiuqing, an industry expert and vice president of Shandong Heavy Industry Group Co., Ltd., said: "This policy does not mention specific manufacturers but only the degree of industrial concentration is right. This is an improvement."

In addition, the scope of reorganization of the "Opinions" also tends to be diversified. New incentives have been added to the merger and reorganization of auto parts and auto companies to service industries and auto companies. “The previous mergers and acquisitions reorganized the main line of the state-owned auto companies at the time to form the core of the restructuring, and now the scope has become more diversified. In the past, China’s largest car dealership group has made huge attempts to enter the vehicle manufacturing industry. For example, we cannot rule out that non-whole vehicle groups are bigger and stronger, and have sufficient funds and strength to restructure whole vehicle companies.” Tan Xiuqing said that mergers and reorganizations in the automobile industry should be “capable of being able to take advantage of them”. As long as they have capital and strength, they can Without limiting industries and companies, “The government is constantly improving regulations and policies. This is a very good thing.”

Still have a long way to go

In spite of this, the industry is still cautiously optimistic and even pessimistic about the implementation of the "Opinions" and its effect in promoting mergers and restructuring in the automotive industry. "The "Opinions" in the final analysis are only macro guidance from the national level, they will not be very detailed, they will not be enforceable, and it is very difficult to truly implement and implement them. The future restructuring may be more diverse, but it is estimated that The process will also be very slow." Tan Xiuqing judged. He also stated that mergers and reorganizations are inevitable trends in industrial restructuring and upgrading, but they should not be excessively required in the restructuring process and reorganization process.

Prior to this, many truck dealers had mentioned that there are too many brands on the market and too many dealers, which leads to disorderly competition among the various companies and lower prices. "No one makes money." Therefore, dealers need to carry out regional autonomy and price self-regulation, and companies should also do this work. “After the 18th National Congress, the country put forward a lot of very practical contents and directions. For example, the nine major industries proposed in the “Opinions” mentioned the idea. At present, there are serious surpluses in the nine major industries and the survival of the fittest must be eliminated. "Heavy-duty truck dealers expressed their approval and optimism for the "Opinions" to the reporter of "Commercial Automotive News": "In the future, the state should take action in mergers and acquisitions."

Wang Jian, a professor at the Chongqing Jiaotong University's School of Transportation and the chief editor of the “China Bus and Bus” yearbook, casts a cold water on this optimism: “This type of policy will repeat its old tone every 3 to 5 years, just a few words. It would be unrealistic to say a word or a paper document to regulate or adjust the development of an industry."

The "Opinions" mentioned in the basic requirements that "we must adhere to the market-oriented operation and give play to the main role of the enterprise. We must give full play to the basic role of the market, follow the economic laws and market rules, and respect the wishes of the enterprise. The enterprises will voluntarily and autonomously through equal consultations. Conduct mergers and reorganizations."

Wang Jian also believes that mergers and reorganizations between industry and enterprises are the development direction of market competition. What the government should do is create an environment of fair competition in the market, rather than rely on administrative measures to dominate the reorganization. In his view, the current national merger and reorganization policy is still difficult to get rid of the shadow of administrative intervention.

In fact, judging from our country’s national conditions, the large-scale enterprises in the auto industry are dominated by state-owned entities. Whether it is the administrative operation mechanism of the enterprise or the local government intervention in the course of the development of the company’s operations, it is accompanied by local and corporate Very complicated interests and disputes, government factors are difficult to peel off. From this point of view, whether it is through government-led administrative intervention, or through complete market operations, or pure market competition to complete mergers and reorganizations between enterprises, are equally unrealistic.

The best combination of market will and government will harden

It is currently recognized that the inseparability of car prices and local interests is the biggest obstacle to the difficulty of merger and reorganization. Because the investment in the automotive industry contributes to local GDP growth, with high output value and high taxes, local governments often hope to drive output value, taxation, and employment growth through the development of the local automobile industry, thus achieving better performance in government performance appraisal. Achievements. Therefore, local policies often attract automobile investment through land, taxation, and other incentives, and they are even more protective of existing car companies.

“One of the fundamental reasons for reorganization is that overcapacity leads to a decline in business efficiency. This has two implications: First, it will increase the size of the company after it is collected; the first is to cut off the backward business or production capacity after it is collected. This must be addressed. The resistance to the government's interests in the location where the reorganized company is located can be imagined,” said Tan Xiuqing.

On the other hand, most of the large-scale auto companies are mostly state-owned. Most business operators still follow the administrative way of thinking. They only want to “make a difference” during their reign, and lack long-term development plans for the enterprise. Modern enterprise systems Not even established. This also makes it difficult for the market-oriented merger and reorganization of enterprises to operate. “Marketization operation is such that, for example, both companies are capitalized companies. After a company can control another company through the stock market, it restructures its board of directors and dispatches its own management team. Most domestic car companies are the top leaders. All aspects of local interests are involved, and they are far from market-oriented operations. It is very difficult for mergers and acquisitions, said Tan Xiuqing.

Of course, if the government has enough right to speak, under the conscious promotion, the merger and reorganization between large-scale automobile companies cannot be achieved. However, after such reorganization, whether enterprises can achieve a win-win situation and whether they can achieve the goal of increasing the degree of industrial concentration and resource allocation efficiency will require a big question mark. Therefore, some industry experts believe that it may only be possible to maximize the willingness of the market and the wishes of the government in their own explorations, and to realize the integration of the distribution of various interests and the integration of the relationship. Only then can they achieve the effective progress and ideal results of mergers and reorganizations.

“Actually, many examples of mergers and reorganizations in the past were the government’s “Lang-Lang matching,” and the effect was unsatisfactory. For example, Guangzhou Automobile’s collection of Gonow is a relatively good example of reorganization. It has achieved 'one plus one' from network, resources, and synergy. The effect of greater than 2' is non-government-led, and the two companies have relatively well-executed examples. The future reorganization can be used for reference.” Tan Xiuqing analyzed that this is an example of a successful state-owned private enterprise.

Tan Xiuqing also believes that the implementation of mergers and reorganizations, local government is a party can not go around, there must be a compromise, so that all parties are relatively satisfied can be successful. Therefore, depending on the nature and scale of the parties involved in the reorganization, as well as the attitudes of local governments, the paths and methods for future mergers and reorganizations may also be more varied.

Another point is also crucial. The implementation of mergers and reorganizations requires that all parties change their views. “How local governments position themselves is centered on the long-term development of the company rather than in-place performance. It is positioned to provide enterprises with a standardized market environment and good services, rather than intervene in the decision-making and direction of the company. In addition, a top-ranking state-owned car company How to consider how to change the way of thinking. If these problems can be solved, other problems are much easier." Tan Xiuqing said.