It’s Complicated

A news item in the Detroit Free Press today (http://www.freep.com/apps/pbcs.dll/article?AID=2009903310491)describes sale of a division of US auto parts supplier Delphi to a Chinese consortium that includes the Beijing City Government and at least one state-owned firm. The interesting part, as noted in the article is, “The deal gives Delphi, which is struggling to emerge from bankruptcy protection, much-needed capital and allows them to exit businesses they are no longer interested in keeping.” The part of Delphi being sold has “750 patents and employees in the United States, Mexico, Poland, India and China.”

So here’s the conundrum: is this a sad day for the US auto parts industry and a sign of the voracious, non-state sector of China gobbling up foreign intellectual property and market share? Or, a great success story that will allow Delphi to get out of bankruptcy and dump businesses it no longer wants to be in? To me it’s the latter, but in any event this development highlights how complex our economic relationship with China is and how hard it is to tell who is the “winner” or “loser” in such transactions.

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2 Comments on “It’s Complicated”

  1. Erin Says:

    I’m not sure there’s a winner or a loser in this situation.

    Based on the clip, it’s not clear exactly what the Chinese companies are planning to do with Delphi. As a consequence, it remains a possibility that they won’t liquidate it and instead will take the course that Wanxiang took several years ago of buying US companies and actually running them — providing jobs to US workers.

    There are certainly lots of PRC investments going on in the US below the radar these days — the folks down in Texas, for instance, have landed a large investment from Taijin Pipe Group to build a new pipe minimill outside of Corpus Christi.

    So perhaps the Delphi deal might turn out to be less complex than it appears: the right price for the right buyer.

  2. bob Says:

    Hank:

    This looks like an easy one. Delphi selling some assets out of bankruptcy. Win/ win. Delphi a relic of the old and failed GM. If Tempo can keep the factories open, great. But it is sad that ownership passes, because the real decisions, the intellectual capital, profit will inevitably gravitate to these new owners in China who will have different priorities than the US sellers had.

    Having said that, Delphi couldn’t cut it. Let the new owners give it a shot.

    Bob


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