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London Black-Cab Maker Seeks Closer Link With Geely
March 18 (Bloomberg) -- Manganese Bronze Holdings Plc, maker of the iconic London black cab, wants to tighten its link with Zhejiang Geely Holding Group Co., the Chinese manufacturer seeking to buy Ford Motor Co.’s Volvo Cars.
Geely’s Hong Kong-listed unit is offered to increase its stake to 51 percent from 19.9 percent by buying new Manganese shares at 70 pence apiece, Mark Fryer, the U.K. company’s finance director, said in an interview. The Coventry, England- based automaker, which would raise about 14 million pounds ($21.4 million) from the share sale, will spearhead Geely’s plans to sell its own saloon cars in Europe, he said.
“Our future will be both as a manufacturer of black cabs in Coventry, although more of the parts will be coming from China, and an assembler and distributor for Geely vehicles,” Fryer said yesterday.
Manganese’s LTI Vehicles unit and its predecessor companies have made cabs for the London market since 1948, according to LTI’s Web site. Geely in early 2009 began manufacturing black cabs in Shanghai for Asian consumers, as well as parts for Manganese’s Coventry plant, under a joint-venture agreement.
Lawrence Ang, an executive director of Geely Automobile Holdings Ltd., said the Chinese company hasn’t decided whether it will take up the share offer. A transaction “might also be subject to approval from minority shareholders of Geely,” Ang wrote in an e-mailed response to questions.
Chinese Expansion
Geely Auto rose 3.5 percent to close at HK$4.16 in Hong Kong trading. Manganese fell 1.2 percent yesterday in London to 84.5 pence after reporting a 6.9 million-pound 2009 loss. The company, with a market value of 25.8 million pounds, hasn’t traded today.
“It is a reasonable move, but whether Geely can gain from the deal will depend on the sales volume,” said Ricon Xia, an analyst at Daiwa Institute of Research in Hong Kong. “Geely has enough funds for the purchase, and by taking over a majority of shares, Geely will have more decision-making power.”
In a statement yesterday, Manganese said parts for its TX4 vehicles will be made in Shanghai, in a move that would eliminate about 60 jobs at the Coventry plant.
Chinese Premier Wen Jiabao is encouraging companies in the world’s third-largest economy to acquire technology and take on foreign rivals. Geely unveiled the Emgrand, its first homegrown model specifically designed for Western markets, in December and is seeking to use Manganese as its European distributor.
Rover, Hummer
Shanghai-based SAIC Motor Corp. paid $116 million for the design rights to MG Rover Group Ltd.’s Rover 25 and 75 cars in 2005 and became the owner of MG’s plant in Birmingham, England, after a 2007 merger with Nanjing Automobile Group Corp.
Some previous attempts by Chinese automakers to expand overseas failed. Sichuan Tengzhong Heavy Industrial Machinery Co. said last month its purchase of General Motors Co.’ Hummer brand was blocked by Chinese regulators as the gasoline-guzzling vehicles didn’t fit the government’s energy efficiency policy.
Geely and Manganese need to agree on a range of commercial issues, including warranty policies and translation of handbooks, before the deal can go ahead, Fryer said.
“If you look back, you would have thought it was a stretch that British people would take to Japanese or South Korean cars,” Fryer said. “But Hyundai and Kia sold about 30,000 vehicles each in the U.K. last year and we sold 1,724. So it’s not going to take much to significantly increase the size and scale of our business.”
Biggest Shareholder
Geely became Manganese’s biggest shareholder in 2007 after taking a 23 percent stake as part of a 53 million-pound venture agreement. That holding was diluted to 19.9 percent after a share placement in June.
Making components in Shanghai for shipment to Coventry has led to cost savings of 1,200 pounds per vehicle so far, with a further 800 pounds expected within six months.
“Unfortunately, we have had to make redundancies in Coventry, but we are losing money and we can’t keep relying on shareholders to keep funding the business,” Fryer said.
China is aiming for 10 percent, or an $85 billion share, of the world’s vehicle and auto-parts sales by 2015, the nation’s commerce ministry said in November.
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Think of how stupid the average person is, and realize half of them are stupider than that.
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