Sanhuan Group: Create "Carriage Carrier" for Auto Parts

- "Any piece of Delphi's assets is valuable to us. Their technological advantage is 15 years ahead of ours."

On March 18, media reported that a Beijing municipal government-led M&A team had already initiated formal discussions with Delphi, aiming to acquire its non-core businesses, such as brakes and suspensions. A state-owned enterprise and a private company were involved in the negotiations, with the goal of acquiring these assets to upgrade Beijing’s auto parts industry. If conditions are favorable, the city even considered the possibility of a full acquisition of Delphi.

While many recognize this as an ideal opportunity, Beijing lacks experience in international deals and often hesitates, fearing risks. Experts have warned that bottom-up approaches could lead to missteps. The city-led M&A initiative, however, shows determination: it's not about avoiding challenges, but about taking calculated risks. After all, even if there are risks, the value of the target is worth the effort.

One is willing to "hit" — the other is eager to "squeeze"

In this scenario, it's Beijing and its affiliated companies that are ready to "fight," while Delphi is more than willing to "squeeze." Let's look at Delphi's motivation for selling: Since filing for bankruptcy protection three years ago, the company has continuously been offloading its non-core businesses. For example, in 2005, it sold its global battery business to Johnson Controls. In 2007, TRW acquired Delphi's brake processing and module assembly assets. More recently, in January, Bienes of Mexico took over Delphi’s global exhaust system business.

Currently, Delphi's core operations include electronics, security, powertrains, heat exchange, after-sales services, and electrical architecture. Non-core businesses like brakes, suspensions, chassis, and steering systems are being sold or shut down. Only a few units, such as catalysts and door modules, have already found buyers. Others are still under negotiation. In short, Delphi is like a fat pig—only the meat is left, and as long as the price is right, they're more than willing to "sell" without hesitation.

Meanwhile, Beijing is determined to "fight" in this deal. To do so, they’ve set up a dedicated entity: In August last year, Beijing Automotive and Beijing State-owned Assets Management Co., Ltd. signed a framework agreement to establish Beijing Hainachuan Auto Parts Co., Ltd., positioned as a unified platform for Beijing's auto parts industry. The total investment from both sides reached 1 billion yuan. Another key player, Tianbao Group, also brought in strategic investors like Shougang, forming Jingxi Heavy Industry, which is linked to the Delphi acquisition. The company was officially listed on March 3, with Shougang holding 51% and Tianbao Group holding 24%.

To build a 100-billion-yuan automotive industry, Beijing must win Delphi!

Why is Beijing so eager to acquire Delphi? First, the Beijing auto industry has long suffered from imbalanced development. The auto parts sector has always been its weakest link. While OEMs like FAW, SAIC, Dongfeng, and GAC have their own supply chains with strong technical capabilities, Beijing lacks similar strength. Most of the local auto parts are low-tech and struggle to meet even the basic requirements of BAIC's own factories. Beijing Benz and Beijing Hyundai rely heavily on foreign suppliers, and Beiqi Foton's core components are entirely outsourced. Beijing needs a company like Delphi to revitalize its industry and drive rapid upgrades.

Second, the city needs to develop its auto industry quickly. The 10th Party Committee's industrial goals include creating a multi-billion-dollar enterprise. With Shougang moving to Hebei, the next major economic driver for Beijing is expected to be a 100-billion-yuan “aircraft carrier.”

Finally, according to the national auto industry revitalization plan, only large-scale companies can receive government support. Acquiring Delphi would provide access to advanced technology and help expand scale—a smart move.

It seems that Delphi may soon be sold. Is it really a blessing for them?

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