2003: Starting with Foreign Trade

Chapter 999: 4 million euros, acquired!

In late May, news of Wei Lai's acquisition of Ford's German factory spread like wildfire, attracting great attention both domestically and internationally. German labor unions were among the first to express their concern about the matter.

Under intense scrutiny, Ford publicly acknowledged the sale, while Weilai took a low-key approach, emphasizing that the acquisition was primarily funded by Weilai's overseas subsidiary and deliberately downplaying the background of the deal.

German media outlets have paid the most attention to the acquisition rumors, even though Weilai and we have a good relationship with Germany. Jinshidai's battery factory in Germany supplies batteries to German companies such as Mercedes-Benz and BMW, creating many jobs.

The media is curious and fond of the young tycoon Tan Jincheng, but the acquisition of Ford's German factory by an Eastern company has been met with caution in both North America and Europe.

"The most difficult part of this acquisition wasn't actually the capital aspect; the real challenge was dealing with public opinion."

In the current context of cultural clashes between East and West and the complete breakdown of globalization, public opinion often has the power to influence mergers and acquisitions. The open environment of the internet makes this process much more difficult compared to Geely's acquisition of Volvo and Weilai's acquisition of Proton.

"Yes, we are dealing with the public opinion environment well, and we have to thank the leaders for their help."

Although it was just the acquisition of a factory, it represented something different. Ever since Tan Jincheng submitted the merger and acquisition filing to the higher authorities through Zhejiang Province, the higher authorities have attached great importance to it and, after several studies, decided to give Wei Lai the support he deserved.

Overseas mergers and acquisitions have become highly sensitive cases in recent years. Even in China, public opinion regarding overseas mergers and acquisitions by enterprises is no longer as patriotic as it used to be, but rather questions are raised about their legitimacy.

Many companies' overseas mergers and acquisitions are not actually what they seem. Everyone understands the reasons behind them, so there's no need to go into detail.

More than 80% of the acquisitions by Weilai were conducted through overseas assets, so there was no transfer of assets. Moreover, Weilai's development momentum in China is currently very strong. Given Tan Jincheng's age, no one would think he would do something like transferring assets.

To help Tan Jincheng successfully complete the acquisition, GJ dispatched its representative in Germany, the economic counselor, and others to assist Tan Jincheng in handling relations with the government, the media, and labor unions.

On May 24, the German Association of the Automotive Industry (DAAD) and the Saarland Ministry of Economic Affairs jointly issued a statement to safeguard the competitiveness of the German automotive industry.

The German Association of the Automotive Industry (VDA) represents core industry associations of German automakers such as BMW and Volkswagen. At the press conference, Tan Jincheng and the VDA chairman jointly signed an agreement that Weilai Overseas Co., Ltd. will be included in the VDA's official website's electrification transformation section.

Weilai's proactive integration and the endorsement of a major German company directly dispelled the controversy surrounding the threat of foreign investment. The governor of Saarland also attended the joint statement, and the Saarland government expressed its support for Weilai's acquisition. Both parties will face the risk of federal-level scrutiny together.

Ford's withdrawal is a blow to Saarland, where the unemployment rate is as high as 7.8%, far exceeding the national average. Saarland now urgently needs foreign investment to save jobs.

At the press conference, the governor also announced that the factory would be included in the "Salar Oblast 4.0 Revitalization Plan".

Besides the urgent need to improve the employment environment, the success in securing Saarland was largely due to the assistance from the Chinese Embassy in Germany. In addition, Tan Jincheng signed a supplementary labor protection agreement with the labor union, promising to protect workers' rights.

Within five years of the acquisition, Weilai has committed to retaining 2000 core positions and investing 10 billion euros in the intelligent transformation of the factory, with 30% of the equipment to be sourced from Germany.

For this joint statement, Wei Lai held a grand press conference in Berlin, inviting many authoritative media outlets to promote it. The G members attending the press conference were all of high rank. Seeing that the parties had signed the agreement, Tan Jincheng was able to breathe a sigh of relief.

Throughout May, Tan Jincheng was flying back and forth between Europe and China, working tirelessly for this acquisition. This joint statement from multiple parties can be seen as an endorsement of the acquisition on the political front, which has alleviated the concerns of the German side.

In terms of employment, Tan Jincheng's future employment data is better than that of the Ford era. For ZF, the factory will become a model for promoting Germany's electrification policy. In terms of industry, technological cooperation has enhanced the bargaining power of the German supply chain.

"Transform commercial acquisitions into milestones for German industrial upgrading, significantly reducing policy resistance." This was the advice given to Tan Jincheng by domestic think tanks, and this joint statement press conference was based on this.

"Is Mr. Tan about to fly to North America?"

The after-party following the press conference was relatively private, with fewer attendees. Starting in mid-May, Europe significantly relaxed restrictions on special events, and most regions lifted mask mandates.

Factories, restaurants, and other businesses have been able to resume normal operations. The long-term strict controls have taken a toll on the European economy.

In a sense, Tan Jincheng's acquisition has also had a positive effect on the German and European economies. Therefore, there is relatively less resistance. It can attract investment to quickly restore factory production and promote the economy, which is a considerable temptation.

"Yes, I'm about to fly to North America. The negotiations there are progressing a bit slowly, and Ford's CEO also wants to meet with me as soon as possible."

Actually, it's not slow at all. In just half a month, both sides have already entered into substantive negotiations on factory pricing and payment methods, which is a very efficient negotiation process.

Normally, for an acquisition of this scale, the initial contact and exploration phase alone could take a month or even several months, and it's not impossible for the two sides to explore each other for one or two years.

"As for North America, we can't offer much help; it mainly depends on you. But we can help introduce you to some people."

Germany is relatively easy to deal with, but North America's position is the most difficult to manage. However, with the change of leadership, Wall Street's influence has increased, giving Tan Jincheng more room to maneuver.

"You have already helped a lot. We will do our best in North America. Also, please let us know to the people in China that we will absolutely guarantee that our advanced technology will not be exported."

The leader nodded: "We trust you on this point; Wei Lai has always done a very good job in this regard."

Given Tan Jincheng's current achievements, the details of his rise to power are already well known to the authorities. Although Tan Jincheng and his companies have cooperated with many capital institutions, their view of Tan Jincheng's attitude towards North America has always been somewhat "radical".

One point alone reveals that although he owns three listed companies on Wall Street, Tan Jincheng rarely goes to North America unless absolutely necessary. He also has a considerable amount of personal fixed assets worldwide, but his fixed assets in North America are the least.

In fact, among Tan Jincheng's partners in the capital circle, there is a similar feeling that Tan Jincheng doesn't seem to like flying to North America. However, it's not easy to ask about this, and Tan Jincheng has never made any public statements.

In North America, the regulatory bodies facing this crisis are still the Committee on Foreign Investment in the United States (CFIUS), the Antitrust Authority, and the Department of Commerce. The Antitrust Authority has never been an issue in any region.

If Jinshidai were to conduct global mergers and acquisitions, there might be some trouble with anti-monopoly investigations. However, this is not an issue for Weilai Auto. Although Weilai Auto holds a leading position in the global new energy vehicle industry chain and has top sales, it is not enough to form the right to dominate the market.

After settling things in Germany, Tan Jincheng immediately flew from Berlin to North America.

At the institution, Yu Liguo received Tan Jincheng.

"In terms of legal terms, we mainly need to meet the requirements of three major laws and regulations. Once these three points are settled, our acquisition will be fine."

In addition to its own legal team, the overseas acquisition team assembled by Wei Lai also hired a considerable number of well-known lawyers in North America to conduct a detailed analysis of various legal regulations.

The three laws are the National Defense and Security Production Law, which is subject to review by the Foreign Investment Committee; the recently approved Inflation Reduction Act; and the Export Control Regulations. A prerequisite for meeting these three laws and regulations is the divestiture of sensitive technologies.

Ford welcomes the acquisition; the only issue is the price, and there are no problems with technology divestiture.

Ford's core technologies at its German factories are engine production lines and transmission control systems, which are designed for gasoline-powered vehicles. Wei Lai wasn't very interested in these, and he also knew that even if you wanted them, Ford wouldn't give them to you.

The solution was simple: physically destroy the specialized molds, retain the general-purpose stamping equipment, sign a technology retrospective agreement, and Ford promised not to claim compensation for the legacy code within five years.

Another sensitive item is the autonomous driving test data, including the European road test data Ford uses to train its L3 algorithm, and the vehicle-to-everything (V2X) communication module, which also contains an export control encryption chip.

To be honest, I'm quite envious of these data. I don't think Ford has the same level of autonomous driving technology, but I do have access to these test data, since Ford has been working in Europe for many years.

"If we could get this data, we could have made much faster progress in the European market. What a pity."

In modern business competition, data seems to have become the most crucial element. Even if there were no regulations in North America, Ford would never hand over this data to Lieutenant General ...

Just as Wei Lai would never exchange his core data and core technology, this isn't about money.

“Let’s handle this in a compliant manner, and we agree to notify Ford.”

The compliant procedure involves removing the black boxes from all test vehicles equipped with GPS tracking, having them destroyed under the supervision of personnel from Ford headquarters, and replacing the communication modules with a version certified by Ford itself in the European Union.

"Let's go see Ford's CEO, let's not waste time."

After meeting with the team at the hotel and taking a short rest, Tan Jincheng asked Yu Liguo to contact Jimmy Farley early the next morning to discuss the acquisition.

Yu Liguo laughed and said, "Aren't we going to wait for President Li Xiang? His plane will arrive this afternoon."

On May 20, Weilai Group officially announced its new CEO: Li Xiang, former CEO of Lotus and current Senior Vice President of Lotus Global, will take over the position of CEO of Weilai Group, succeeding Zhang Yong.

The listing of Lotus has elevated Li Xiang's status in the automotive industry to a new level. Although his personal wealth did not increase much after transitioning from the internet automotive media industry to the automotive industry, his career and reputation have steadily improved.

Of course, Li Xiang, who has become the CEO of Weilai Group, doesn't need to worry about his personal wealth. Although he doesn't have the same treatment as Zhang Yong, the salary level and equity incentive standards compared to Wang Fengying's are the greatest sincerity that Tan Jincheng has given to Li Xiang.

Although the acquisition of Ford's German plant was led by Wei Lai's overseas team, Tan Jincheng also required Li Xiang to participate, which is the most basic requirement for a CEO.

Tan Jincheng shook his head: "Let's go see Jimmy first. Today's meeting is informal, so we don't need to wait for him." Tan Jincheng's visit to Ford has also attracted a lot of attention in North America. In case of any unforeseen circumstances, Tan Jincheng needs to reach a consensus with Ford as soon as possible to avoid any setbacks.

"That works too. Come to think of it, Jimmy and you are quite similar in personality, boss."

Jimmy Farley, an engineer by training, is a typical INTJ personality type. During his time at Toyota, he developed a strong aversion to vague statements and prioritized data-driven approaches. With the mission of saving Ford, Farley has been making numerous moves this year.

Not only did Ford decide to close its European factories, it also decisively cut off its North American sedan business, focusing instead on SUVs and electrification.

In addition, he often publicly criticizes his team for being too slow. After the failure of this year's electric vehicle launch event, Jimmy decisively reorganized the communications department. In terms of efficiency, he is similar to Tan Jincheng.

“That day I talked to him about how you value efficiency, and that Ford should be faster. Jimmy didn’t feel offended at all; on the contrary, he was very happy.”

"This is a good thing. If we had encountered an Indian CEO, we would have had a lot of headaches."

There are many professional managers in North America and even around the world. Many well-known companies around the world like to hire Indian CEOs, but their performance is really unpredictable.

"It's normal, actually. Ford's electrification progress is too slow. It has been crushed by Tesla in the North American market. With Musk becoming the world's richest man, how could Ford not be anxious?"

Back then, Ford's former CEO publicly mocked Tesla's Model 3 production difficulties, stating that Ford was ready to meet its production needs. Musk then publicly posted photos of the Ford factory, retorting that it looked like a factory from the 60s.

Today, the Mach-3 is selling like hotcakes worldwide, while Ford's then-CEO's boast that it had prepared production capacity seems like a joke, as the difficulty of ramping up production capacity for the Ford Mach-E has remained unresolved.

Mach-E is actually the same as Model E, and it is positioned to compete with Tesla's Model Y. This model was even once considered to be the most threatening model to Tesla, and its name was a deep provocation to Musk.

The rivalry between these two companies is endless, ranging from disputes over business strategies, sales volume, patents and technologies to verbal battles. They are practically mortal enemies. If we were to use two domestic companies to describe the relationship between these two, then the relationship between Xiaomi and Huawei would be quite appropriate.

"Hi, Tan, it's a pleasure to meet you, and welcome to Ford."

Foreigners are always very enthusiastic when they need your help. As soon as they met, Jimmy refused Tan Jincheng's handshake and gave him a big hug instead. The location of their meeting was also very interesting; it was in Ford's cafeteria.

Jimmy wants to treat Tan Jincheng to dinner.

“Hey Jimmy, I feel the same way; also, Jimmy, this acquisition will allow Ford Europe to achieve positive cash flow 18 months ahead of schedule, according to our calculation model.”

"In addition, after divesting Salluis, your ROI on electrification will increase from 5.2% to 8.7%; oh, by the way, this is a Goldman Sachs report."

"Just like you cut off the North American sedan business, this deal is the final step in Ford Europe's slimming down and consolidation. Wei Lai's takeover can change the media headlines from Ford's collapse to a strategic reshuffle."

"Imagine three years from now, when Wall Street talks about the textbook of traditional automakers' transformation, it will definitely be your North American electrification plus European asset-light combination."

When it comes to praising someone, Tan Jincheng is an expert.

Jimmy was clearly taken aback for a moment, then burst into laughter. As a professional manager, having his strategic intentions recognized by his peers, even if it was just pure flattery, was something to be happy about.

"Thank you for the compliment, Tan. No wonder Elon said you are a very interesting person. Oh, by the way, I said that to him too, but he didn't seem to believe me."

"Haha, that's because Ford and Tesla don't have a very good relationship."

"You misunderstand, we respect every opponent; alright, let's have a meal first, I'll treat you to a Detroit-style pizza and our electric set meal."

Tan Jincheng had eaten Detroit-style pizza before, but this electric meal was something he had never heard of before. However, when the food was placed in front of him, Tan Jincheng was greatly disappointed.

The so-called electric meal is a vegan or low-carbon meal. In Jimmy's words, it is in response to Ford's electrification strategy. It's green, after all. After forcing himself to eat a few bites and offering some compliments, Tan Jincheng focused on pizza, hot dogs, and coffee.

Unlike Tesla's upscale Silicon Valley-style cafeteria, Ford leans more towards practicality and localization. It's not as flashy as tech companies, but it has plenty of solid Midwestern style and car culture references.

After a brief introduction to the style of Ford's Dining Room, Jimmy got down to business.

"The union will not agree."

The conversation with Tan Jincheng was one-on-one. The cafeteria was chosen because it offered a wide view and there were no other people around, allowing for a more direct exchange and expression of their thoughts.

Ford was actually considering shutting down its German plant, but the unions were demanding 20 billion euros from Ford, otherwise they would not allow them to shut it down, which was a major headache for Ford.

“IG Metall has privately stated that they would prefer a new electric vehicle company if their salaries increase by 8% and there are no forced layoffs.”

IG Metall is the German metalworkers' union. During his stay in Germany, Tan Jincheng devoted most of his energy to dealing with IG Metall, secretly meeting with the union chairman and the factory's working committee to avoid being ambushed during formal negotiations.

"Oh? Tan, you agreed?"

Tan Jincheng nodded: "Yes, I agree. The union is not our enemy; we can absolutely become allies."

Regarding dealing with labor unions, Tan Jincheng had experience in the process of acquiring Lotus, and he also consulted Shufu, whose biggest obstacle when he acquired Volvo was the labor union.

The three key elements to winning over a labor union are: establishing relationships with key opinion leaders beforehand, securing legal agreements to lock in benefits, and shaping a win-win narrative through public opinion.

After the acquisition plan was exposed, Wei Lai used the media to create momentum. The union issued a press release in an attempt to appease the employees, which Jimmy saw. However, he was unaware of Tan Jincheng's secret schedule.

This is the advantage of Tan Jincheng's preference for quick negotiations; if it takes too long, his itinerary in Europe cannot be kept completely secret, putting him at a disadvantage in negotiations.

"Well done, but isn't a 300 million euro offer a bit low? Also, could we be more flexible with the payment terms?"

Since Tan Jincheng was able to handle the union, Jimmy didn't have much to say. The two sides had basically reached a consensus. Yu Liguo and his legal team were also able to handle things like technical isolation very well, so the two of them didn't need to worry about that.

“Three hundred million euros is not a small amount; it’s a reasonable offer. However, a flexible payment method is not a problem.”

Shutting down would require an upfront payment of 2 billion euros, while not shutting down would require an additional investment of 100 to 200 million euros annually, in addition to layoffs. This is the most pressing concern for Jimmy, who is eager to move towards an asset-light model.

This doesn't even include the factory's annual losses of 3 million euros. Jimmy, who speaks based on data, cannot tolerate this.

However, under the current circumstances, it is almost impossible for Jimmy to find a buyer as excellent as Wei Lai. Although it is an Eastern company, Wei Lai is the best potential buyer at present, both in terms of financial resources and the support behind it.

Jimmy shook his head: "Three hundred million euros is more reasonable, but there is no premium. Also, I remember you have a saying, 'A cut of the bill brings joy, a cut of the bill brings pleasure,' right?"

This slap, a slap of joy, was quite comical and made Tan Jincheng laugh.

"Then how much do you need?"

Jimmy's words had a hidden meaning: you really do get what you pay for. Apart from those regulated technologies, Ford wouldn't mind spending more money on technologies that were optional, but he couldn't say it out loud.

"How about 3.5 million euros?"

After finishing the last bite of pizza, Tan Jincheng wiped his hands and said with a smile, "How about this, we can offer 400 million euros, but we would appreciate Jimmy's assistance in terms of technical cooperation."

Ford's GE1 platform architecture for vehicle manufacturing is not subject to the current technology control measures. If it can be acquired, it can shorten the vehicle development cycle by 12 to 18 months. In addition, the BMS algorithm and thermal management system can complement Ford's existing technologies.

The acquisition price of 300 million euros plus a patent licensing package of 100 million euros saves 20% of the cost compared to purchasing them separately, and most importantly, it can shorten the factory renovation and R&D cycle.

Jimmy flatly refused: "Four hundred million euros wouldn't be enough."

"But this will greatly shorten our development cycle, enabling us to pose an absolute threat to Tesla in the European market and freeing up Ford's energy to compete with Tesla in the North American market."

Tan Jincheng is indeed cunning. Compared to the almost lost European electric vehicle market, the North American electric vehicle market is what Ford values ​​most, and Ford only has one competitor: Tesla.

Unfortunately, the relationship between the two is not good. As a professional manager, if he can deliver a fatal blow to his old rival in the electric vehicle field, it will be a highlight of his career.

It has to be said, Jimmy was tempted.

(End of this chapter)