February 12, 2009 / 9:15 PM / 11 years ago

DEALTALK-US automakers look to Asia for brand sales

(For more Reuters DEALTALKs, click [DEALTALK/])

By Soyoung Kim and Jui Chakravorty Das

DETROIT/NEW YORK, Feb 12 (Reuters) - Earlier this decade, General Motors Corp (GM.N) and Ford Motor Co (F.N) scoured Asia for automotive bargains, capitalizing on the region’s financial crisis to snap up assets at fire-sale prices.

Now the tables have turned and Detroit’s automakers are looking to Asia to help ride to the rescue.

Facing the worst economic crisis in decades, GM, Ford and Chrysler LLC are scrambling to shore up cash by selling brands and vehicle lines at a time when most buyers for automotive assets have pulled back.

With few options, Detroit automakers have reached out to Asian automakers about potential sales of a number of brands, people familiar with the discussions have said.

“They could be the buyers of last resort, the only ones left with a good bank balance, for now,” said Larry Rinek, automotive consultant at Frost & Sullivan.

There is also a good chance the overtures will fail. The global recession, tight credit and sinking auto sales make any auto asset an extremely tough sell, and Asian automakers have also been forced to scale back production and investment.

From Hyundai Motor Co (005380.KS) to China’s SAIC Motor (600104.SS) Asia’s automakers have repeatedly said they have no appetite for deals at a time when cash is scarce and global sales are in decline. But efforts to interest them in potential deals have continued nonetheless.

People with direct knowledge of the discussions told Reuters that Ford Motor Co (F.N) has reached out to several Asian companies including Hyundai, SAIC, Geely Automobile Holdings Ltd (0175.HK) and Chongqing Changan Auto (000625.SZ), about its Volvo brand.

Executives of Kia, led by Kia President Eui-sun Chung, have had discussions with GM over the Saab premium brand, three sources with knowledge of the talks said.

Last year, Chrysler talked to companies including Renault-Nissan and Hyundai about its Jeep brand or other assets before reaching a pending deal with Italy’s Fiat.

GM and Ford say they have had contact with potential bidders for Saab and Volvo, respectively, but have declined further comment.

The wide-ranging talks between Detroit automakers and their Asian counterparts show how the balance of financial power has shifted in the industry over the past decade.

The reversal of fortune is particularly sharp for GM, which bought most of the assets of distressed South Korean automaker Daewoo Motor Co in 2002 and has used it as a hub to develop a range of small and fuel-efficient cars.

But Japan’s Toyota Motor Corp (7203.T) passed GM as the industry’s top-selling automaker in 2008.

In recent weeks, GM has approached China’s SAIC Motor Corp (600104.SS) about selling some assets, two sources familiar with the discussions said. GM said it was not planning to sell shares in its joint-venture Shanghai GM. SAIC declined comment.

In addition to Saab, GM is trying to sell its Hummer SUV line and reviewing its Saturn brand. Chrysler said it has three bids for its Viper sports car business.

Ford is in the process of courting bidders for Volvo after it sold luxury Jaguar and Land Rover brands to India’s Tata Motors Ltd (TAMO.BO) and sold about two-thirds of its 33.4 percent stake in Mazda Motor Corp (7261.T) last year.

Hit by the same downdraft, Hyundai has been slowing overseas investment in Russia and Brazil, two of the industry’s fastest growing markets in recent years.

“We have no interest whatsoever in acquiring Volvo,” Hyundai said in an emailed statement.

Hyundai’s affiliate Kia echoes that line: “Given the global economic slowdown and tough auto industry, we have no interest in buying any other brands,” Kia spokesman Michael Choo said.

With private equity firms in retreat, analyst say the industry’s distress has opened the way for more transactions that could involve little or no cash.

Last month, Chrysler struck a deal with Italy’s Fiat SpA FIA.MI in which Fiat would be given a 35 percent stake in the struggling U.S. automaker in exchange for access to its small car technology. Fiat is not paying any cash under the deal.

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