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The prospect of Cerberus selling Chrysler Corp to a Chinese buyer represents a much more realistic possibility in a few years time than a ‘quick flip’ in the short term. Industry observers have speculated that Cerberus may be able to reap significant upside out of its USD 7.4bn investment in Chrysler by restructuring the operation and selling it to a Chinese automotive player a few years down the road.
When news that Chrysler had been put up for sale first emerged last February, Guangzhou Automobile Industry Group (GAIG) was alone among the Chinese automakers to have contacted DaimlerChrysler’s advisers JPMorgan to obtain sale information. According to one China-based source, GAIG considered Chrysler to be too large an acquisition target, and was only willing to consider acquiring parts of it, or in cooperating with a private equity firm. The source had said at that time that if Chrysler ended up in the hands of a private equity fund, GAIG would have been very interested in buying parts of Chrysler, or in cooperating with a project such as moving Chrysler to China.
The reality is that, despite having a desire to move into the US market, Chinese automakers lack the financial and managerial resources to acquire Chrysler in the short term. China FAW Group, the northeast China-based auto group, had ruled itself out of any Chrysler bidding on this basis, as had Shanghai Automotive. The latter company is China’s largest auto maker. Three other Chinese automakers, all of which would be too small to acquire Chrysler, stated in February that they had no interest in a deal. These included Dongfeng Motor, the central China, Hubei-based auto manufacturer, ChangAn Auto Group, the Chongqing-based largest auto maker located in southwest China and Beiqi Industrial Holdings, the Beijing-based automotive company.
However, this situation could change as the industry expands and the main players take part in consolidation activity. Already there are signs that this is on the cards, with Nanjing MG Motor Co indicating in March that it may sell as much as a 50% stake to outside investors to help fund its expansion.
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