For GM, VW and Their Chinese Partners, Breaking Up Is Hard to Do
For GM, VW and Their Chinese Partners, Breaking Up Is Hard to Do
(Bloomberg) -- Some marriages are just too hard to break up. The many joint ventures between multinational automakers and their Chinese betrothed might be just that.
The Chinese government said Tuesday that foreign carmakers will, over time, be allowed to own more than 50 percent of business units operating in the country. It’s a symbolic shift from the policies that have ruled the industry since the ’90s, propelling the Chinese car market into the world’s largest.
While foreign automakers may like the idea of keeping all the profits their vehicles generate in China, they’re unlikely to quickly ditch partners who would be costly to buy out and whose presence helps negotiate local customs and politics.
“I don’t suspect we will see everybody unwind their joint ventures and just go it alone,” said Jeff Schuster, senior vice president of forecasting with researcher LMC Automotive. “To unwind all those would be a lot of work and is probably not the right message to your local partner.”
General Motors Co. is among those signaling stability. Although the Detroit-based automaker’s partners get half of the profit they haul in there each year -- plus insight on the tech that powers its hybrid vehicles -- the company’s immediate statement was one of assurance: “We will continue to work with our partners to provide high-quality products and services to consumers.”
Volkswagen AG said its existing JVs won’t be affected either, while BMW even mentioned plans to expand its venture with Brilliance Auto. But as the industry pivots toward electric powertrains and self-driving cars, automakers may be eager to protect their investments in expensive technology.
“This opens the door to negotiating with your partner exactly what the right structure is going forward,” Schuster said. “It gives foreign automakers the leverage of having more control over future decisions because they could always hang that over the partnership. One of the bigger concerns has always been the protection of intellectual property, especially with autonomous vehicles.”
Still, the existing ventures probably won’t change much very soon, said John Hoffecker, vice chairman of consulting firm AlixPartners, especially if partnerships are working well. “It would have been great if these new rules were put in place 10 or 20 years ago,” he said.
--With assistance from Jeanny Yu Kevin Buckland Christoph Rauwald Elisabeth Behrmann Tian Ying and Yan Zhang
To contact the reporters on this story: David Welch in Southfield at dwelch12@bloomberg.net, Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net.
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Jamie Butters, Anne Riley Moffat
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