Cash flow is the foundation for the survival and development of international companies, and it is also the support for international expansion. If a company lacks cash, it is not only impossible to expand but it is not far from bankruptcy.
Recently, the issue of the way out of Chrysler attracted great attention from domestic companies. For FAW or Chery’s acquisition of Chrysler, the vast majority of analysis results are impossible. Because even if the two companies have this desire, the restrictions on cash flow cannot be achieved.
"Cash flow is the foundation for the survival and development of international companies, and it is also the support for international expansion. If a company lacks cash, it is not only impossible to expand, but it is also not far from bankruptcy." Mr. Conrad, president of TRW Asia Pacific, accepted An interview with the Financial Times revealed the secrets of the expansion of multinational companies.
Bosch merged Weifu, Changdian, Eaton ten years in China and established more than a dozen companies, TRW continuously builds new bases in China... When many multinational automotive suppliers are expanding in China, people look As a result, their strength after development comes from the full cash flow.
Expanded capital
In 2006, GM and Ford's North American production and sales fell sharply, immediately causing tight cash flow to some of its suppliers. However, some cash-rich multinational companies have not been affected by this market shock. On the contrary, some have also stepped up the pace of expansion in the Asia-Pacific region. According to analysis, whether or not it has cash flow support has become the main weight that determines the survival of auto suppliers.
An industry source told the “Financial Times†that not only the suppliers were affected by the cash flow, but also the survival status of the entire vehicle company depends on the cash flow.
At the beginning of this year, most domestic vehicle and component suppliers grinned, because last year's unprecedentedly high car market filled their pockets with silver. And happier than domestic companies are multinational auto companies and their suppliers. Compared to the ever-decreasing North American and European markets, the Chinese market is their biggest “God of Wealthâ€.
In many companies' annual financial statements, the words "cash flow" and "profit" are highlighted. These international giants know that cash means the ability of the company to continue to operate and the future development of the future. In the absence of cash flow, they can only watch the hot market and do not dare to act rashly.
"For an international company, the lack of cash flow support is really a disaster." One person from a car company lamented the "Financial Times" reporter.
His car company is one of the best companies in the world, but in the past two years, because of the rapid investment, the cash flow has a negative value and the capital chain has encountered certain problems. The company had to slow down the pace of listing new cars in China.
The "Financial Times" noted that those multinational corporations that are accelerating their expansion in China are companies with good profitability and abundant cash flow, whether they are vehicle manufacturers or parts suppliers.
Blind expansion will drag down companies
The view of a manager of FAW is that, from a worldwide perspective, all problems in the operation of enterprises are mostly caused by cash flow problems. Last year, GM, which was in a quandary, desperation to sell its financial services business, aims to obtain net cash of 14 billion U.S. dollars in three years, which will ease the financial crisis to a certain extent.
This person thinks that South Korea’s Daewoo auto bankruptcy is a typical case of dragging down companies because it lacks cash flow protection and blindly expands. At the end of the last century, the Asian financial crisis broke out. Banks tightened their credit. Daewoo Motors, which had a debt of US$80 billion, relied on the government’s emergency rescue efforts and struggled for two years. It was eventually declared bankrupt by a creditor’s bank and was acquired by General Motors in 2002.
Daewoo President Kim Yu-chung’s dream was to create a global power for the automotive industry in the short term. For this reason, he took the development of the enterprise as a gamble and threatened to “add a new company every three days.†However, he ignored the back-up required for expansion - cash flow, resulting in a large number of corporate debt, excluding profit, thus creating a black hole in cash flow management, resulting in South Korea's largest commercial bankruptcy case in history.
According to analysis, last year, supplier giants Delphi and Visteon had a difficult time in North America, and they were also directly related to cash flow shortfalls. The upstream raw materials and management costs have increased. The downstream auto companies have reduced their costs and driven down the prices of their products. The sandwiched suppliers have been squeezed out of profitable space and caused a cash flow crisis.
“We are leading automotive companies with leading technologies rather than being dominated by auto companies. This is the key to our ability to maintain profitability and cash flow.†Edelcom revealed another secret of TRW's dedication to the market.
Cash plagued Chinese suppliers
The cash status of many Chinese auto makers is not good, which is the basic reason for their inability to participate in cross-border acquisitions, but this does not prevent them from earning high profits. The “Financial Times†interview was informed that one of the important reasons why private enterprises have broken their heads to drill for the entire vehicle industry is the temptation of the high profit of the auto industry.
Li Jinxi is a representative of the "drilling in" automotive industry from parts. As the chairman of Liaoning Shuguang Automotive Group, he had the following conversation in an interview: "Why do we have to complete the car when the parts are doing very well?" "One of the reasons is the cash flow from the vehicle it is good."
Most Chinese companies did not have the exact concept of cash flow in the past, and many companies had large differences in their accounts receivable and actual income. This is particularly evident in auto parts suppliers. Some analysts have analyzed that the cash flow crisis in the parts and components industry has led investors to believe that the entire industry is not profitable, which will inevitably affect the healthy development of the Chinese auto industry.
According to analysis, for multinational corporations, sufficient liquidity is the capital for its expansion; for domestic companies, cash flow is the basis for its normal operation. The fact that vehicle companies have pressed for several months more for small companies often means that they are still alive and dead, even for large companies.
It is reported that the lack of independent research and development capabilities and core technologies has led to this dependence of Chinese suppliers. Therefore, the key to obtaining sufficient cash flow lies in the fact that companies themselves improve their technological R&D capabilities, and only in this way can they create greater living space.
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