Auto parts industry should guard against "joint venture traps"

Northwest Bearing Group Co., Ltd. wanted to use the advanced technology, scientific management, and well-known brands of FAG, the largest bearing company in Germany, to make it grow and develop. However, since the joint venture, Xixi has not tasted a hint of sweetness, but has constantly swallowed bitter fruit: continuous Losses of more than 10 million yuan in two years, eventually led to the West axis "wrong married sedan to marry the wrong man", fell a "losing his wife and breaking soldiers" the outcome.

The author believes that for domestic auto parts companies, the following lessons should be learned from the “West shaft joint venture”:

Must insist on autonomy. Openness is necessary, and introduction is also necessary. However, in the entire “blind date” process, if you do not adhere to independence, you will lose your core interests. Therefore, domestic auto parts companies must adhere to autonomy in all circumstances.

First, we must firmly grasp the critical 2%, that is, we must control. When a foreign company is in a joint venture with our company, it often asks for a shareholding, otherwise it will not be discussed. The minimum holding ratio is 51%: 49%. By insisting on this ratio, they obtain control of the entire joint venture at the lowest cost, regardless of business decisions or management decisions. In contrast, 49% and 1% of the Chinese side are not much different in power, but they differ greatly in terms of risk taking. Experts believe that Chinese companies cannot easily lose control of the company in joint ventures, insist on 51%, and insist on controlling.

Second, we must fully weigh the advantages, disadvantages, risks and risk aversion of joint ventures. During the process of joint venture negotiation, we must earnestly conduct feasibility studies and infeasibility studies, carry forward democracy, collect collective wisdom from various aspects such as experts, entrepreneurs, and legal advisors, and make clear the advantages, disadvantages, risks, and risk aversion of joint ventures.

Third, pay attention to asset evaluation. Asset appraisal is also an important link for Chinese companies to protect their own interests. In the joint venture, it is necessary to hire a responsible asset appraisal company that can conduct justice. The appraisal must include the participation of the staff of the relevant departments of the company to prevent the enterprise value from being underestimated and the national interest from being undermined.

Enterprises must dare to win the right to "marital autonomy." Obviously, joint ventures, restructurings, mergers and acquisitions are all business operations, and should naturally be dominated by companies. Chinese entrepreneurs must dare to safeguard their ecosystems in which they participate in the competition without sabotage, dare to break free from the “chain of joint ventures and restructuring led by government-led companies,” and boldly strive for “lifelong happiness”.

Past experience guide for the future. A philosopher also said: “People can't step into the same river twice.” Domestic auto parts companies should learn a lesson from the West shaft joint venture and must not let the West axis suffer losses in domestic auto parts. The body of the company is copied and repeated.

DC Linear Actuator

Linear Actuator Co., Ltd. , http://www.nslinearactuator.com