The UK’s leading consumer motoring titles do not seem to have given much, if any, coverage to Chinese Premier Wen Jiabao’s visit to MG Birmingham last Sunday. Indeed, Dave Leggett, Managing Editor of authoritative Automotive Industry website just-auto.com, seems to be the only commentator to have fully understood the visit’s real significance…
Three things seemed to underline the seismic shift in the balance of the world economy last week.
First, in what is an increasingly sad state of affairs, Saab appears to be slipping away from having a chance to get back to normal operations. Whatever one might say about General Motors’ stewardship, this is an ‘old Europe’ company and brand that ought to have a chance. The plain fact of the matter is though, it can’t get the volume to survive quickly enough. There’s a cash crisis that appears to be getting worse, confidence – especially among suppliers – ebbing away. The big hope in the business plan is to break into China. But there isn’t much runway left.
The second thing is the state of the single currency and sovereign debt crisis in Europe. The pressures at work are considerable and another patch-up bailout for Greece is being seen by many as the least worse solution. Big cuts are coming to real incomes in Greece and in other bailed out and severely indebted countries in the eurozone. They can’t devalue their currencies to get out of trouble, as they would have done once, and the people in these countries are not exactly happy about the ‘pain’ they are being told that they have to endure.
The euro project was supposed to mean growing incomes across the continent so that everyone could eventually get to Germany-style affluence – a ‘levelling up’. It hasn’t quite worked out that way and if Spain gets dragged in to the financial crisis, worries multiply big time. The German economy may be performing well – on the back of strong exports to Asia – but it’s a fragile situation in Europe generally that threatens international financial instability.
And amid the political squirming in Europe, in flies Chinese premier Wen Jiabao to the UK and Germany for our third observation. The Chinese are now in a very powerful position, economically speaking. China has a huge trade surplus and its economic growth has been bailing out the world’s economy over the last few years.
One way out from some of the world’s economic imbalances is for China to import yet more, for Chinese people to consume more Western goods. For all the economic growth that there has been in the past ten years, there’s still a lot of untapped potential. Expect to see Western politicians fawning over Chinese leaders in a bid to capture some of that growth for their own countries’ firms.
However, the Chinese will want things on their terms. China has deep pockets and has increased spending on some European Government bonds lately. Hard pressed Hungary, for example, has had significant financial assistance from China. In the UK, Wen Jiabao visited Longbridge in Birmingham, once home to the UK’s biggest car plant. It’s now a much smaller assembly facility owned by SAIC. He talked positively about how the Chinese-owned company can design cars in the UK. And the British aspect to the Roewe brand in China does indeed play well there.
But how much activity – whether designing or making – the cars is ever going to be in Britain? I would guess not a huge amount. It will be maintained at a level that is commensurate with keeping the British link alive from a brand standpoint, plus any assembly of MG cars for sales in UK/Europe (low and likely to remain so – the Chinese market is where the sales bulk is) while also quietly utilising the European design arm (not least from an acquisitive technology learning perspective; designers and engineers from European firms can be lured to it).
So, there you have it. Yes, MG is an interesting case study and one that underlines the shift still taking place in the global economic order.
And good luck to those still trying to sort out Saab.