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July 23, 2005

Nanjing buys MG Rover for £60 million 

The reports are coming out of Price Waterhouse Coopers that MG Rover has been purchased by Nanjing Automotive, with The Times putting the figure at £60 million. The company’s been around since 1947, but it’s not the best known Chinese automaker. (In China, it puts together Fiat Palios and the Mk I Seat Ibiza.) However, it could be from this point.
   To draw a western analogy, Nanjing is sort of where ABC TV was before Charlie’s Angels came along.
   There are still some intellectual property issues to sort out, but the picture appears to be a relocation of volume car manufacturing to Red China (makes sense, given labour costs) with specialist car manufacturing retained in Great Britain (also makes sense, given British expertise and the higher prices that can be attained).
   I had thought the SAIC–Magma deal would be the one approved, given it had the support of one union and former Ford of Europe boss Martin Leach; but SAIC has shown itself to be overly subject to the political games played by the Politburo’s mergers’ committee. It has lost face in PWC’s eyes, and should have done more to preserve it. Nanjing apparently went in with the fewest conditions, at the best price, and kept face by trying to understand the British. Stories came out soon after MG Rover’s April collapse that SAIC was less than honest, with its representatives pretending to be drunk at parties with the Brits as a shrewd move to gain a negotiating advantage. (Yet the British media still continued to paint them as saviours and heroes. I say, old boy, they have not been playing by the Marquess of Queensbury rules. They wanted to screw you then, and the ‘conditions’ mentioned by PWC suggest that not much had changed, Martin Leach or no Martin Leach.)
   Nanjing’s move makes sense from its own brand perspective. Nanjing now has some old brands under its belt, probably including the coveted MG, which places the company in the same position as Lenovo or Haier. Sixty million pounds is not a lot to pay for MG’s 80 years’ history and a fast-track to exports for the loss-making Communist-state-owned manufacturer. They will get it back through the premium their goods will sell at: if they thought Phoenix was doing well out of the CityRover, then they will be quite pleased with their profit per unit.
   It’ll likely be the first Chinese automaker to sell in Europe, well ahead of the big boys who are still building cars under licence, with the exception of Geely and China Brilliance (who have no recognizable brands).
   It’s the sort of example you might expect to find in one of (co-author) Simon Anholt’s insightful books, such as his earlier Brand New Justice, and Nanjing could prove, finally, that brands are more important than financial wizardry.
   Whether or not Nanjing can sustain the manufacture is another matter, but brands have a funny way of propping things up and helping a company weather the worst. And with the faltering of one of its domestic JVs, there may be capacity for some Rovers popping out of a Red Chinese factory. Let’s hope this acquisition not only helps preserve some British jobs, but overall can bring greater equity to global incomes. Through that, we all gain.
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