The financialization trend of Chinese auto companies has attracted attention.
The most far-reaching one is probably the Dongfeng Group. All of its subsidiaries have joint ventures. The Group's profitability is all dependent on equity and it becomes a financial company in the actual sense. Experts believe that capital controls derived from technological controls are forcing the Chinese auto industry to take the path of financialization.
Active and passive?
The use of financialization to transform state-owned enterprises is the main motivation for business operators. Before the full-scale joint venture, Dongfeng’s days were very sad. In that year, Dongfeng Group was one of the third-line enterprises that China considered for its preparation for combat readiness. It is not so much a company as a company but a small society. The country’s second-largest investment in China’s second-largest automobile city was once second only to the FAW Group’s development capabilities and top-notch technical personnel. However, under the tide of the market economy, the ills caused by its state-owned enterprise system have become a heavy burden. Due to geographical factors and very slow flow of people, the inbreeding of Dongfeng Company was serious and its management efficiency was low, which seriously affected its competitiveness. As early as many years ago, Dongfeng Company had difficulty in making even the salary. The use of a joint venture's quick knife to go to the root cause is the most convenient way to transform old state-owned enterprises. Through a full-scale joint venture, Dongfeng has solved the problems that many state-owned enterprises have accumulated. For example, in the negotiations with Nissan, Dongfeng insisted that the joint venture company should solve the problems of retired employees and medical insurance. It also packed 3 billion accounts receivable and 13.3 billion yuan in debt into the joint venture company.
If the contribution rate to the company’s business is taken as the standard of financialization, the financial trend of automotive companies will not be Dongfeng one. Financialization can quickly produce benefits. As long as they have the right to own shares, they can be more educated and wait for dividends. They are the most logical business methods for operators when they need to achieve rapid results.
When auto companies are faced with the challenge of modern enterprise system reform, financialization is an active strategy or a last resort choice. This is an extremely sensitive issue and one should abandon its motives and only look at the results.
Segmented corporate culture
In view of the high degree of financialization of automotive companies, corporate culture is gradually diluted. The authors surveyed dozens of automotive joint venture employees and found that the vast majority of people have very low corporate loyalty. Loyalty to the foreign partner's corporate culture far exceeds that of their own corporate culture.
For example, young Dongfeng employees, many people are not interested in the history of Dongfeng venture, many employees of the joint venture company's worship and understanding of foreign joint venture culture is often stronger than the Dongfeng company's parent culture. At the Shanghai Auto Show not long ago, Dongfeng did not even appear as an overall corporate image. Dongfeng affiliated Shenlong company, in order to completely catch the Citroen chariot and even gave up a certain value of the Dragon brand. Huatai Automobile Co., Ltd. is also publicly announced that it will not take the road of independent research and development. Its production technology will all come from South Korea's Hyundai and will position itself as a member of Hyundai’s strategy in China. Huatai is setting off an upsurge in studying modern Korean culture. Its production, management, and sales are all "Korean." At Beijing Auto Group, Beijing’s modern corporate culture is basically modern. At the time of Beijing Benz’s preparation, many young employees at Beiqi have already become proud of being part of the Mercedes-Benz family, and are quite indifferent to the parent culture of BAIC.
The press conference of the auto show this year was all organized by foreign capitals and held in China’s national territory. The unification of foreign companies’ corporate image is in stark contrast to the division of Chinese companies’ images.
View of world-renowned auto companies, all have a profound corporate culture. Corporate culture, such as a lifeline, is in command of all business activities and marks the characteristics of different companies. Companies are people, Toyota, Ford, Mercedes-Benz, etc. At any Toyota plant in the world, its business philosophy is marked by the distinctive Toyota culture logo. Toyota's lean production method, while assimilation of employees of different races, has also injected “Toyota Culture†into the company and employees loyal to Toyota Culture have created high-quality Toyota cars. Toyota used a high quality product to further conquer the market with culture. The appeal of Korean modern culture is equally important, and the “modern spirit†is even a prelude to Korean cars entering the market. Subsequent to the joint venture of China Automobile Group's affiliated companies, the dilution of corporate culture has to face the reality. The direct result is the fragmentation of the product image and the accelerated devaluation of brand assets.
Financialization Decreases Chinese Business Strength
What kind of image does the person eat? Loss of creativity in doing nothing.
The desire for quick gains has caused many auto companies in China to compete for different types of foreign capital. A joint venture is a piece. The Chinese side is so active that foreign capital can be selected with ease. Many of the world’s leading car companies have a cooperative relationship with many Chinese auto companies, and they share the same source of jealousy among Chinese companies. The intricate interests of Chinese and foreign auto companies have become the subject of never tire of automotive media.
The same is “more than one woman†or “more than one husbandâ€. It also owns 50% of the shares. The strategy of foreign investment is not divided by the length of the battle line. Instead, all joint ventures are included in the overall strategy; similar models are produced. It is also often due to considerations of checks and balances of Chinese companies, but China has shown a lack of overall strategy. For example, FAW Toyota's new crown, its direct competition is FAW-Volkswagen Audi. Although the media believe that regardless of Crown or Audi, FAW is the biggest winner; but from the perspective of market competition, Toyota and the public is the real protagonist in this game, FAW mainly provides a competitive platform.
In many joint ventures, key positions are controlled by foreign parties. China's business participation rights are poorly managed, and management and technological capabilities are growing slowly. Long-term inaction, companies are in danger of losing their business capabilities. Dongfeng Nissan’s assertion that the contribution rate of China’s business to the enterprise is zero is not groundless.
Recently, many foreign companies have established R&D institutions in China. However, these institutions only perform marginal work such as adaptability improvement and matching tests in product technology R&D. The basic research on core technologies remains in the domestic technology center. For example, the Dongfeng Nissan R&D Center does not carry out independent research and development, and only conducts research on localized technologies.
Can 100% of localized products avoid corporate financialization? Because as long as the product's trademark rights are in the hands of foreign investors, even if you spend all your energy to digest foreign technology, it is still a cheap labor, and you cannot change the passive role. Financialization has created an unsustainable corporate ecological value chain: selling the environment, selling resources, and selling cheap labor in exchange for limited profits. Compared with cooperating foreign capital that sells brands and sells technology, China's financial capital has not been optimally utilized.
Some experts said that the international auto giants are using their capital hegemony and technological hegemony to make the Chinese auto industry a vassal of financial capital.
Dr. Li Xianjun, an economics researcher at the Automotive Development Research Center at Tsinghua University, said that financialization refers to the way companies or groups of companies use capital operations rather than industrial operations as a means to guide investment returns and financial goals. The tendency of financialization is the inevitable result of technological hollowing. As an auto enterprise group, its parent company does not control the strategic business of industrial development. What is the difference between an insurance company bank and a venture capital company? The greater danger is that, as a non-financial institution financial enterprise, its capital strength is difficult to match. Financial institutions counterbalance. If the group is listed on the whole, there is another risk: the hostile acquisition, the group's mother had to withdraw from the auto industry.
How to avoid financialization
Not all of the equity participation will lead to financialization, and the use of financial capital by companies that control the dominant business will increase their competitiveness. For example, the recent participation of Wanxiang Group, a well-known auto parts company, in GAC, is just a move in Wanxiang Group's overall strategy. The universal use of financial capital is only a means to enhance its physical competitiveness, and will never become a goal. In order to have the right to operate independently, Hafei, Chang'an, Chery, Geely and other Chinese auto companies have adopted a cooperation and non-joint venture approach to foreign capital. They seem to live more casually. Of course, they have not encountered the historical debits of old state-owned enterprises such as Dongfeng and FAW.
The business community generally believes that it is of great importance to control the business entity to control the enterprise. Therefore, the Wanxiang and other large enterprise groups, no matter how many subordinates establish the company with assets as the link, but the main business as the core technology is still directly operated by the parent company. Because Beiqi Automobile has Foton Motors, FAW has reduced its risk of financialization due to its truck products, red flag sedan and Xiali sedan; SAIC Motor has set its own brand to reach 5 million in 2007 when its production capacity reaches 1 million in order to resist financial risks. Ten thousand strategic goals.
Viewing world-renowned auto companies such as Toyota, Ford and others are all based on industrial development models. They are directly involved in production and operations, centrally control all aspects of enterprise readiness, and attach importance to the long-term development of the company; while China’s Dongfeng, Beijing Auto and other groups tend to adopt purely controlling interests. Ways to make profits are more important for short-term investment returns.
The root cause of financial impulsiveness is that the government’s assessment standard for state-owned enterprise operators is profitability. As long as the assessment criteria of state-owned enterprises are not changed, the financial trend of auto companies will be inevitable. (morning)
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