Changhe solo faced with the challenge of Hafei Fei as a foundry

The rumors of the raging Changhe “independence” incident continued, and the words “Suzuki had long wanted to cut off the joint venture relationship with Changhe River” from the Chang’an high-pitched mouth let the game between the two sides upgrade again, even though Changhe immediately clarified the cooperation with Suzuki. Normal, but this storm also makes Changhe at the critical moment of "solo" face great challenges.

According to the news of Tencent Auto, Changhe Independence only waits for the approval of the country's parts. However, Hafei, who entered Chang'an at the same time as Changhe, is exactly the opposite. Tencent Automobile learned from Hafei that in addition to Hafei's two models of horse racing and Songhua River are still in production, other models of Hafei now basically all stop production, and Hafei's production capacity at this stage is almost always used for Changan OEM. Tencent Motors was informed at the same time by two insiders from China Chang'an and Hafei. Hafei has already negotiated with Changan, and the next step will be to consider Hafei as a Changan Ford foundry.

Changhe Hafei, the two companies that had once been brilliant in the field of micro-vehicles, apparently chose a different path four years after the reorganization. Independent Changhe, Hafei foundry, a tough attitude, it is necessary to seek autonomy; a compromise, let the parent company arrangements.

Changhe Hafei took a huge loss

In addition to the support of local governments, the biggest bargaining chip for Changhe Automotive to have the courage to develop independently is the cooperative relationship with Suzuki. At present, Changhe Suzuki (there are Jingdezhen and Jiujiang two bases) mainly produces joint venture Suzuki brand cars, and Hefei Changhe mainly produces Changhe independent brands of Fortune, Freitas Microfacet and Freda Single and Double Rows. Unlike Changhe, Hafei does not have a joint venture partner but only own brand. Before being acquired by the Changan Group in 2009, Hafei Automobile had a loss of 470 million yuan. From the figure of Changhe Auto's loss of 738 million yuan in 2009, Changhe was overwhelmed by Hafei. In order to revitalize the assets of both parties, Changan spares no effort to "transmit blood" to them. It is understood that by the end of 2012, Changan has provided 2 billion yuan of direct loans and 4.4 billion yuan of loan guarantees to Hafei and Changhe.

On the basis of the parent company's capital input, Changhe actively implements cost reduction and innovation. According to Chen Ping, deputy general manager of Changhe Automobile Sales Co., Ltd., due to joint procurement with its parent company, Changan Automobile, this alone can reduce the cost of 180 million yuan. In addition, Changhe also increased the development and delivery of new products. From April 2010, Changhe Automotive has launched the Big Dipper e, Liana a, and also launched the Long Di Sunshine Edition and Furida Extended Edition. In 2011, Changhe Fortune and Paixi went public.

According to the data from the China Automobile Association, between 2010 and 2012, Changhe Automobile's total sales volume fell from 175,500 vehicles to 130,100 vehicles. However, Changhe Suzuki’s sales have continued to rise, rising from 76,700 units in 2010. For the 84,100 units in 2012, it can be said that Changhe Ling has become the main sales force of Changhe Automobile.

Zhang Zhiyong, a marketing expert in the automotive industry, pointed out that Changhe Suzuki is a pillar that supports the sustainable development of Changhe Automobile. Without Changhe Suzuki and Changhe Automobile's operations, the development of independent brands will be greatly constrained. Due to various efforts, Changhe has reduced losses to 180 million after one year of restructuring. By 2011, Changhe has realized a profit of 1.18 million yuan.

However, after three years, Hafei is still deep in loss-making quagmire. As early as the end of 2009, in the face of poor performance, sales of Hafei fell seriously, Changan Automobile will shift the Changan Star S460 models to Hafei production, while introducing wide-body large micro-enterprise into Changhe. However, the strategy of "reserving micro-wealth" has not been effective. In 2010, Hafei's mini-vehicle sales still fell by 15.9% year-on-year in nearly all auto companies' production and sales.

According to the announcement, by the end of 2012, Hafei had total assets of 3.02 billion yuan and net assets of 4.61 billion yuan. In 2012, Hafei achieved a sales income of 2.68 billion yuan and a loss of approximately 760 million yuan. In terms of sales volume, Hafei has been declining year after year. According to data from the Automobile Industry Association, sales of Hafei have fallen from 245,000 units in 2009 to less than 70,000 units in 2012. In the first half of 2013, sales volume was only 16,800 units. In April this year, Changan Automobile announced a related-party transaction announcement, saying that the company had convened the ninth meeting of the sixth session of the Board of Directors on March 29, 2013. The meeting reviewed and approved the Proposal on the Agreement on the Renewal Technology License and Production Cooperation of Hafei Automobile. The motion clearly stated that Changan Automobile provided some models to Hafei Motors.

This is a continuation of the "Framework Agreement on Technology Licensing, Technical Services and Production Collaboration" signed by Changan Automobile and Hafei Automobile in 2010. Changan Automobile stated that the purpose of the transaction was to fully utilize the advantages of Changan’s complete vehicle manufacturing and supply system, which would be conducive to the continued normality of the foundry business formed with Hafei Automobile.

Hafei insiders told Tencent Automobile that Hafei’s current two models, the horse racing and the Songhua River, are still in production, and the remaining products have all been discontinued.

"Hafei is currently cooperating with Changan, and the specific content is clear in September." Bai Feiliang, deputy general manager of Hafei, disclosed to Tencent.

The news from Chang'an also points to Hafei's OEM. Chang'an insiders told Tencent that the current Chang’an and Hafei are talking about several cooperation programs, but in the future they will consider Hafei as a Changan Ford OEM.

Visible, Hafei's foundry label is firmly affixed.

Zhao Ying, a researcher at the Academy of Social Sciences, believes that the huge gap between Changhe and Hafei in strength has allowed the two companies to choose today's development path. Changhe itself has the advantage of being a small car, and its joint ventures and independent research and development are stronger than Hafei. Therefore, Hafei can only choose to rely on Chang'an Group to develop in accordance with Chang'an's overall plan. For Chang'an, Hafei can also be considered as the northeastern stronghold to enhance the North-South distribution.

Cultural Fusion

In addition to different development models, Hafei and Changhe also have significant differences in the integration of enterprise management and culture. In the early stage of reorganization, the senior management team of Changan Group, formerly General Manager of Hebei Chang'an (click to view the latest figures), and former Deputy General Manager of Changan Automobile Sales Company, Li Li, respectively entered Hafei and Changhe Automotive to form a new management team. However, Changhe, which was supposed to slowly develop with the parent company and partner Suzuki's joint support, broke out in early 2012 because Changan wanted to cancel Changhe Suzuki's production qualification. Chang’an’s senior management stationed in Changhe was completely removed due to the incident. Then, Changhe’s general manager and two deputy general managers were respectively held by Tong Zhengrong (click to view the latest figures), Wu Jijun, and Xiang Lianchao. For the old Changhe car people.

"Compared with Hafei, Changhe's management is obviously more independent," said a person close to Changhe Motor. Changhe, with the support of local governments, began to seek the "solo" road. Until recently, Changhe reached an agreement with its parent company, leaving Changan only to wait for the approval of a national ministry. The current status of Hafei's management is completely different from Changhe's "semi-autonomous" state.

According to insiders, almost all of Hafei’s executives are sent by Chang’an. According to the statement made by Liu Zhengjun, general manager of Hafei Motors, the sales company, with the exception of the general manager and the secretary of the company, all the others are employed through open competition. There are also internal managers, originally more than two hundred people, and after its streamlining there are only 150 people remaining.

It can be seen that, first of all, in the management of enterprises, Hafei and Changhe have already run counter to each other and have gone through two paths of compromise and obedience. Zhao Ying believes that corporate restructuring is important for cultural integration. In particular, for companies such as Changhe, Hafei and Changan, which belong to the state-owned enterprises, the fierce cultural friction is much more difficult than the integration of private enterprises.

Mergers and reorganizations are the trend of the times and are the necessary stages for the regulation of the automobile industry. Zhang Zhiyong, a marketing expert in the automotive industry, believes that neither Changhe's independence nor Hafei's OEM is the best model for the integration of car companies. For Chang'an, it is necessary to adopt policies that are more compatible with Huairou and strengthen the substantive integration of acquired companies more quickly so as to meet the long-term interests of the group company. Automobile industry analyst Feng Shiming believes that integrated companies must also look at integration from a higher historical perspective. Being merged does not mean demise, but in existence and growth in another, larger form.

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