Judging from the complementarity of business composition, the merger of JAC and Chery Automobile is undoubtedly the most perfect combination. But the problem is that the value of "it's a chicken head, not an phoenix tail" makes it easy for the seemingly perfect combination to produce flaws.
From the integration case in history, one side of the integration is on the verge of bankruptcy, and “strong and weak coalition†is the key element of successful integration. Obviously, this is not the current status of Chery and JAC.
In 2008, Chery and JAC suffered some setbacks due to the decline in the commercial vehicle market and the setback in the overseas performance of cars. JAC's 2008 net profit fell 82.63% to 570 million yuan; total profit fell 94.58% year-on-year, which is the toughest year since its establishment.
However, JAC has not yet reached an unsustainable level. Jianghuai used Ruifeng commercial vehicles, light trucks and passenger car chassis as its main products. Although sales of these main products dropped in 2008, they still maintained a leading position in their respective market segments. JAC passenger car segment gradually got out of the doldrums in 2009 and its monthly sales increased to 11,000, which greatly encouraged Jianghuai Automobile's confidence. "Two companies in the upswing period cannot be merged." Jianghuai Automobile executives told the CBN reporter more than once.
In contrast, Chery Automobile looks more like an advocate of the "Kiejiang merger." Chery Automobile founder and former party secretary of Wuhu City, Zhan Xialai, was promoted to the secretary-general of the Anhui Provincial Party Committee in 2008, and was also the head of the leading group of Anhui automobile industry. He is considered to be the biggest promoter of the Chery JAC integration. It is said that as early as in 1999, 2003 and 2006, Anhui Province had plans and opportunities for the integration of Chery JAC.
Standing on the height of the Anhui automobile industry, Zhan Xialai may have a longer-term view. "The formation of a car enterprise group with a capacity of more than one million cars will enter the national key support sequence...especially if the vehicle production capacity does not rapidly expand to the one million supported by the state, it will be eliminated or merged." The province's automobile industry revitalization plan writes like this.
With regard to the integration of JAC and Chery, several analysts have pointed out that the merger of the two can bring about synergies. Chery is known for its sedan business. Micro-vehicles have just started. Commercial vehicle companies are almost empty shells. JAC has a well-established commercial vehicle foundation covering light trucks, heavy trucks, passenger cars and chassis. The complementarity between the two is almost perfect, and the synergies that can be achieved by the merger have a great auxiliary effect on each other's rapid business growth and output.
However, the integration of JAC and Chery still has a huge obstacle: the organizational structure. Which party leads the integration? Who will lead the merged new company? How should the new organizational structure be built? All questions.
Due to different backgrounds and different development models over the years, JAC and Chery have formed different company cultures. There is a conflict between the two cultures. Under such circumstances, if one party is dissatisfied with the organizational structure, the newly formed group will never have a day of peace. Changan's integration of Jiangling is a good example.
However, there is no solution. An official from the relevant department in Anhui Province stated that "airborne" is an approach being considered. First, several large companies were “kneaded†into a large group, then airborne one chairman and collaborated in the form of a loose coalition. "It's a bit like the relationship between Renault and Nissan. First we must break the barriers and bind them together. Let them gradually have some opportunities for cooperation and slowly realize the integration."
Under the administrative intervention of the Anhui provincial government, the integration of Chery JAC has become a general trend and it has to be. Both Yin Tongyue and Zuo Yan'an must recognize that the way out now is to come up with a reasonable method of integration as soon as possible instead of continuing to solo.