Blog: Nanjing MG presentation
Dave Leggett | 11 November 2005
I’m not sure how much of substance actually came out of yesterday’s visit to the wilds of Essex to hear what Nanjing auto plans to do with MG. It was pretty much what we already knew, although it was at least coming from the horse’s mouth and gets us bang up to date. And these occasions are still useful in getting a feel for what’s going on and which way the wind is blowing.
Mr Wang’s presentation contained quite a bit of information but was short on anything solid for Longbridge. I just get the feeling that the China end of things is what’s really driving this. Manufacture cars in China or UK? Won’t the Chinese naturally want to load as much manufacturing as possible in China? Now the engines (that require expensive development work to make Euro 4) have gone east, they’d have to be shipped from China to the UK for Longbridge production (models, remember, that will look even more uncompetitive for Europe in 2007) and Longbridge is always going to struggle to compete with Nanjing – increasingly so as Nanjing develops the necessary supply of parts locally on the models concerned (Shanghai, where some Rover models will be made, isn't far away, either).
It dawned on me as Mr Wang described what Nanjing had got for its £53 million that the deal was a nice little earner, on paper anyway. Platforms and models off the shelf (yes, long in the tooth, but perfectly okay for China and a technology platform to build on), three engines and a gearbox (just the ticket for China), the MG brand (good sports heritage and not too bruised under Phoenix, come to think of it) and a significant plank in the development of a global business strategy in areas such as parts. It’s a pretty good technology transfer package that potentially takes Nanjing up a notch or two in the Chinese automakers' pecking order (assuming that the domestic scene isn't overly complicated by the conflicting rights that SAIC may claim on some models).
All that for a sum that is around a tenth of the kind of budget needed to develop a single model from scratch. Not a bad bit of business.
I wouldn't entirely rule out the grand bluff theory though: the theory is that Nanjing Auto never seriously wanted MG Rover assets in the first place, was punching above its weight in the bidding process for domestic political reasons and would now be very happy to do a deal with SAIC. Talking about making all four models won't be going down well in Shanghai, but may make SAIC more tempted to remove that thorn and secure engines also.
Those MG assets may have been cheap to acquire, but there's big potential toil and grief in making them work for a small car company lacking good car experience (the JV with Fiat Auto hasn't exactly been a howling success, I'm told).
One final thought. 'We'll try our best' is a phrase that, in this context, is open to some interpretation.
News item below.
Nanjing Automotive Corporation (NAC) has set out its initial plans to revive the MG brand and return low-volume car production to the Longbridge site in the UK’s West Midlands....
I'm starting to get a small idea of the scale of things here in China, but really, I'm only scratching the surface of this vast country....