Keith Fitz-Gerald

Is China Detroit's Lifeline?

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In an interview with the South China Morning Post, Geely Automobile Holdings Executive Director Lawrence Ang said that "we're constantly approached by bankers about the possibility of mergers and acquisitions [with international automakers]."

A Long List of Deals

The auto sector has already been bustling with deals. Here are just a few that have transpired in recent years:

• 2004 -- SAIC Motor Co. spends $500 million to buy an initial 48.92% stake in South Korea's Ssangyong Motor Co., and then boosts its stake to a 51.33%.
• 2005 -- SAIC purchases the design rights to the super-looking MG Rover 25 and 75 models for $99.97 million from kaput British carmaker MG Rover.
• 2005 -- Competitor Nanjing Automobile Group buys the rest of MG Rover's assets for $87 million.
• 2007 -- Working together, SAIC, Chery Automobile Co. Ltd. and First Automotive Group Corp. band together in preliminary buy-out talks with Chrysler. No deal.
• January 2009 -- SAIC learns the hard way not to buy brands when Ssangyong goes belly up and files for bankruptcy.
• February 2009 -- Beijing says it will slow down global acquisitions and concentrate on competencies that boost local strength.
• March 2009 -- Geely purchases Australian parts-maker Drivetrain System International for $42.55 million.
• April 2009 -- Chongqing Changan Automobile Co., Geely Automobile Holdings, Dongfeng and Guangzhou Automobile Industry Group Co. Ltd. announce their desire to purchase global assets from international brands in trouble. Geely's chairman also notes at the much publicized Auto Shanghai 2009 auto show that he sees Geely being a major global brand by 2015.

At the end of the day, many Americans will fear the acceleration in China's pace of global acquisitions. But there are two key reasons that I'm glad to see this happening.

First, history shows that the markets continually weed out the financially weak in a form of financial Darwinism that is as inevitable as the dawn of a new day. And with the financial crisis serving as an extinction-level event, the imminent arrival of Chinese companies on the global scene is an opportunity. It's also part of the solution, however reluctantly people might want to view that.

And second, while there will be short-term pain and probably more than a few dented egos in Detroit, I will be glad to see the era of greedy, incompetent and overcompensated executives who summarily fleeced the last of America's once-proud automotive industrial complex for all its worth is coming to an end.

It will be nice to see the industry return to doing what it does best -- making great cars and great parts, even if it ultimately takes on a form that we cannot imagine today. If that happens, we may look back and see that China was, in fact, Detroit's lifeline.

Keith Fitz-Gerald is the Investment Director for Money Morning/The Money Map Report. For more information on Keith, read his bio here.