Fuyao set to bid for Ford's glass assets
Fuyao Glass Industry Group Co Ltd, China's largest auto glass manufacturer, is expected to submit a final bid to acquire Ford Motor Co's North American auto glass-making operations, according to sources close to the company.
Fuyao Chairman Cao Dewang has just completed talks with Ford subsidiary Automotive Component Holdings LLC (ACH) and some Wall Street investment banks on the sale, according to Fuyao spokesman Chen Wenjing.
After two rounds of talks with Ford, the Fujian-based glass manufacturer has been selected to submit a final bid for the assets.
Chen revealed that the company's board members had a day-long meeting on Wednesday, but did not elaborate.
However, a statement is expected soon.
Market analysts say that Fuyao's move highlights the Chinese auto industry's appetite for overseas expansion by purchasing their counterparts' troubled assets.
Following Nanjing Auto's acquisition of UK car firm MG Rover, Chinese automakers Geely and Chery are trying to sell their economic vehicles to North America and Europe in the same way that Toyota and Honda did two decades ago.
Fu Meiwang, an analyst with Haitong Securities Research Centre told China Daily yesterday that purchasing assets and localizing their products in foreign markets would help Chinese auto manufacturers sharpen their competitive edge. Last month, Nanjing Automobile Group announced plans to set up a factory in Oklahoma to build MG-brand cars.
Fu said that although the value of the transaction between Fuyao and Ford may not be worth more than US$1 million, it was a milestone for the Chinese firm.
"The acquisition may help Fuyao to promote its brands in the North American market and facilitate its exports to the market," said Fu.
"Although it will face increased costs as a result of making glass in the United States, production in North America will give Fuyao improved market access and cut transport costs."
North America is an important market for Fuyao, where its total sales reached 267 million yuan (US$33 milion) in the first six months of 2006, 15.6 per cent of its global sales.
Fuyao has established a company in the United States, Fuyao North American Incorporated (FYNA), which is responsible for distribution and after-sales service.
Several days ago, officials from Tata, India's largest automaker, visited Fuyao's headquarters in Fujian Province, where they discussed a potential partnership.
Market analysts said Fuyao has long been considering transferring part of its production overseas.
"Fuyao is planning to export half of its products in the coming three to five years," company chairman Cao Dewang said in a recent interview.
Around 30 per cent of Fuyao's products are currently exported, according to the company's report for the first half of 2006.
Fuyao expects its production this year to reach 11 million units, with the figure set to rise to 13 million units by the end of next year. This would make it the world's fourth-largest auto glass company, according to a company statement.
The company recently announced that its net profit for the first half of this year increased by 39.54 per cent, due to soaring sales in North America and Asia which reported sales growth of 16.68 per cent and 71.49 per cent respectively