Zhejiang Geely Automobile Holdings reportedly plans to purchase the entire Coventry-based black cab manufacturer Manganese Bronze Holdings after Christmas so as to sharpen its manufacturing technology and management skills, China Business Journal reported over the weekend, citing an anonymous source.
This move comes after the British carmaker's October 30 bankruptcy filing, which will allow Geely to buy sole control over Manganese Bronze (MB) for a fairly low price, the source said, without revealing the specific amounts. Before going into bankruptcy, the company asked for a bailout from its second largest shareholder, Geely, but was refused.
The Global Times was unable to reach a Geely representative with knowledge of the deal by press time.
In order to help the 64-year-old British cab maker regain its footing, Geely has twice bought stakes in Manganese Bronze, in 2006 and 2010. Currently, Geely holds a 19.97 percent stake in Manganese Bronze and 52 percent of their joint venture Shanghai Maple Automobile, while the other 48 percent stake in the JV and the right to sell black cabs outside Asia belongs to the British side.
Manganese Bronze was burdened with 11.4 million pounds ($18.4 million) in net debt and saw a loss of 3.6 million pounds in the first half of the year, with 1,081 black cabs being sold in England compared with 1,222 over the same period in 2011.
Despite the debt, the potential acquisition would still be a win-win, providing Geely access to Europe's mature markets thanks to Manganese Bronze's powerful sales channels and well-established brands there, Cui Dongshu, deputy secretary-general of the China Passenger Car Association, told the Global Times Sunday. Geely sells its vehicles to over 50 countries, mostly in the developing world.
However, Geely has to develop new vehicle designs instead of continuing to use the model of the TX4, a business vehicle produced by its Shanghai JV, when breaking into new markets, Cui said.
The TX4 model, based on MB's classic black cab, not only faced quality scandals in the overseas market, but also has not sold well in China since its debut in 2009, Cui noted.
On October 12, MB said it would recall some 400 TX4 black cabs due to defects in a new type of steering box, and that it would stop the development of new vehicle designs.
Data from domestic news portal Sohu Automobile indicated that 500 TX4s were sold in China for the 10 months through October, a 45.07 percent decrease year-on-year.
If reports of the deal are true, the integration of the two firms will be a concern, given their history of difficulty cooperating, Cui said, noting that since 2007, Geely has been marginalized by MB.
In 2010, Geely bought the Volvo passenger vehicle business from Ford, ending four consecutive years of sliding sales for Volvo Car Corp.
Geely is expected to improve its brand value via cooperation with other global automobile makers, which will help it attract more consumers in China and abroad, said Wei Guangju, an industry analyst from Adfaith Management Consulting.