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Mergers, Acquisitions and Takeovers Case Study

Case Title:

Shanghai Auto, Nanjing Auto Set to Merge: A Chinese Alliance to Compete With Global Brands

Publication Year : 2010

Authors: S Chaudhuri, A Ghosh

Industry: Automobiles


Case Code: MAA0209IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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"In an attempt to compete with the global players in the automobile industry, two of China's biggest automakers, Shanghai Automotive Industries Corporation (SAIC) and Nanjing Automobile Corporation (NAC) agreed to form an alliance. The State-Owned Enterprises' (SOE) 'comprehensive co-operation' on design, production and sales of new cars, was viewed as a stepping stone for a possible merger. China's officials were supportive of this move as it was a way to promote Shanghai Auto as a complete auto maker to compete with the foreign car makers in China, and then globally. The alliance would certainly reunite MG and 'Rover' under the same corporate umbrella. During the 2005 breakup of Britain's MG Rover group, Shanghai Auto secured the intellectual property rights of the Rover 75 sedan and other vehicles, while Nanjing Auto acquired the tooling from the shuttered Longbridge factory. Thus the reunion between these two firms would certainly save a huge amount of legal, operational and marketing expenses. In addition, the tie-up would shore up SAIC's commercial vehicle segment and boost its overall competitiveness. But some analysts felt that the two companies remained far apart in terms of any tie-up. While Shanghai Auto had been insisting on final control of any alliance, Nanjing Auto had been calling for equal control. Thus, whether government backing, as well as commercial logic would enable these bitter rivals to put aside all their differences and merge into a global auto giant was the question to be answered.

Pedagogical Objectives:

  • To discuss the dynamics of the Chinese Automobile market.
  • To discuss the dynamics of SAIC and NAC's operation.
  • To analyse the role of a merger in increasing a company's overall competitiveness.
  • To discuss the future of such strategic alliances.

Keywords : Shanghai Automobile Industry Corporation (SAIC), Auto parts, Volkswagen, Automotive market, Big Five, Ssangyong Motor Company, Nanjing Automobile Corporation, Rowe 750, Rongwei, Rover 25, General Motors, Lehman Brothers

Contents : 
Chinese Auto Industry: The Trends
Joint Venture between international automakers and domestic automakers
Auto export manufacturing bases established
Shanghai Automotive Industry Corporation: Recording Consistent Growth
Nanjing Automobile (Group) Corporation: Throwing Big Challenges in Small Size
Shanghai Auto, Nanjing Auto: Future of the New Entity

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