MNCs in the News-2014-08-22

According to IBM, the US government has approved Lenovo’s US $2.3 billion purchase of IBM Corp.’s x86 server unit. IBM announced it has received a note from the Committee on Foreign Investment in the US (CFIUS) that the deal had passed review. There were some concerns about whether or not CFIUS would approve the deal given the sensitivity of foreign investments in IT generally and Chinese investments in IT specifically, but such concerns proved unfounded. Chinese authorities had approved the deal long ago, one of many overseas investments pursued by the voracious Chinese computer/electronic company over the past eight years (“Lenovo Extends Global Outreach,” China Daily, October 21, 2013, http://www.chinadaily.com.cn/business/overseascnep/2013-10/21/content_17... “China Approves Lenovo, IBM $2.3b server Deal,” China Daily, July 7, 2014, http://www.chinadaily.com.cn/business/2014-07/07/content_17651883.htm; Gao Yuan, “Green light for Lenovo’s IBM Server Acquisition,” China Daily, August 16, 2014, http://www.chinadaily.com.cn/business/2014-08/16/content_18368123.htm)

Daimler Mercedes-Benz became the latest in a line of foreign automobile companies to face the ire of Chinese antitrust authorities. This week, authorities from the anti-monopoly bureau of Jiangsu province found Mercedes “used its dominant position in after-market parts to maintain price controls.” Fines for it and sanctions against other German/European carmakers are in the offing, despite these and other firms already cutting the prices of their parts and after-market services dramatically. One BBC reporter called foreign firms and automobile companies victims of their own success and perceived superior quality (“Mercedes guilty of Price-Fixing, Say Chinese Authorities,” BBC News, August 18, 2014, http://www.bbc.com/news/business-28832494).

China’s General Administration of Quality, Supervision, Inspection, and Quarantine recently announced that Chrysler and GM will recall, respectively, around 11,000 sports-utility vehicles and 700 cars due to software and airbag problems. In July this year, Shanghai GM also launched a multi-thousand car recall due to front seat bracket welding problems in some 2014 Cadillac vehicles (“GM Recalls Cadillac Sedans in China,” China Daily, July 31, 2014, http://www.chinadaily.com.cn/business/motoring/2014-07/31/content_182306... “Chrysler, GM to Recall Defective Cars,” China Daily, August 21, 2014, http://www.chinadaily.com.cn/business/motoring/2014-08/21/content_184601...)

Mondelez China, a unit of Mondelez International Inc., a US confectionary, food, and beverage company, in partnership with the China Youth Development Foundation, is supporting a three-year program on healthy lifestyles that involves the building of rural kitchens, the operating of rural gardens, the production of textbooks, teaching training, and the training of managers and cooks in food safety and nutrition. Mondelez China has given more than US $1 million in financial support and its employees are actively engaged in teaching and the organization of program related activities, as well (Wang Zhuoqiong, “Mondelez Puts Focus on Healthy Eating for Rural Children,” China Daily, August 20, 2014, http://www.chinadaily.com.cn/business/2014-08/20/content_18451711.htm)

The Shanghai Free Trade Zone (SFTZ) has signed a MOU with Amazon, a US e-commerce mega-player, which will allow it to set up a cross-border e-commerce platform in the SFTZ. In tandem, Amazon will build a logistics and warehouse center. Amazon already has a noteworthy presence in China in terms of warehouses, but is a relatively trivial player in the online sector. It remains to be seen exactly how much tax would be imposed on the goods that it imports into the SFTZ, how many Chinese firms will sell their wares through Amazon to the outside world, and so on (Laurie Burkitt, “Amazon.com Coming to Shanghai’s Free-Trade Zone,” Wall Street Journal, August 20, 2014, http://online.wsj.com/articles/amazon-com-coming-to-shanghais-free-trade... Meng Jing and Wei Tian, “Amazon to Open Shanghai Platform,” China Daily, August 20, 2014, http://www.chinadaily.com.cn/business/tech/2014-08/20/content_18457351.htm; “Amazon in Shanghai E-Commerce Pact,” BBC News, August 21, 2014, http://www.bbc.com/news/business-28875994)

Japanese car companies have now joined the Chinese antitrust authority firing line. China’s National Development and Reform Commission (NDRC) has imposed a record antitrust fine, totaling about US$ 200 million (1.24 billion yuan), on 12 Japanese auto-parts companies and bearing makers including Sumitomo Electric Industries, Aisan, Mitsuba, NTN, and Denso because of these companies’ price fixing activities over a 10 year period. Sumitomo suffered the largest fine of about 290 million yuan, the largest ever imposed on a single firm. The NDRC did not fine Hitachi and Nachi-FUJIKOSHI because they reported their price fixing agreement and supplied evidence to regulators (“China levies record antitrust fine on Japanese firms,” Bloomberg, August 20, 2014, http://www.bloomberg.com/news/2014-08-20/china-levies-record-antitrust-f... “China imposed highest fines to a dozen Japanese auto- parts makers,” Nikkei, August 20, 2014, http://www.nikkei.com/article/DGXLASGM20H0F_Q4A820C1MM0000/; “Japanese Auto Parts Suppliers Fined over Price Monopoly,” China Daily, August 20, 2014, http://www.chinadaily.com.cn/business/motoring/2014-08/20/content_184543... “China Fines Japanese Car Parts firms for price-fixing,” BBC News, August 20, 2014, http://www.bbc.com/news/business-28863024; Keith Bradsher, “China Fines Japanese Auto Parts and Bearings Makers in Price Rigging,” New York Times, August 20, 2014, http://www.nytimes.com/2014/08/21/business/international/china-fines-jap...)

Japan will be the first destination for liquid natural gas (LNG) from Mississippi when a large-scale LNG facility begins operations in 2019. Mississippi Governor Phil Bryand says his state and Japan have strong economic ties, facilitated by Japanese investment, and touts the revenues the project will bring his state and the stable energy supplies it will offer Japan. Yokohama Rubber Company is constructing a tire factory in the state, following in the footsteps of Toyota and Nissan, and Bryand says he will support these firms by reducing taxes, improving infrastructure, bolstering skill training, and preventing the expansion of labor unions (“Governor of Mississippi will export LNG to Japan first,” Nikkei, August 18, 2014, http://www.nikkei.com/article/DGXLASGM2401R_X10C14A8FF8000/)

NEC Corporation and the Mexican Space Agency will collaborate in the development of advanced satellites. NEC provides technologies and know-how on basic design and assembly and hopes to win orders for controlled systems and ground-based communication equipment. NEC and the Mexican government have already signed a Memorandum of Understanding to build the earth observation satellites by 2020. NEC has a long history of providing products and services in Mexico, and the government has chosen NEC for its strength in small-sized satellite and communication systems. This year, Japan’s Mitsubishi Electronics also delivered a satellite to Turkey (“NEC to support Mexico’s satellite development,” Nikkei Asian Review, August 20, 2014, http://asia.nikkei.com/Business/Deals/NEC-to-support-Mexico-s-satellite-... “NEC and the Mexican Space Agency collaborate in satellite developmment,” NEC website, July 29, 2014, http://www.nec.com/en/press/201407/global_20140729_02.html)

One month after hosting Chinese President Xi Jinping for a state visit to Seoul, South Korean President Park Geun-Hye received Alibaba founder and chairman Ma Yun. They discussed e-commerce, film, electronic games, and medical industries. Ma, who had been part of the huge business delegation that accompanied Xi to Korea, told Park that Alibaba planned to launch “all-around cooperation on e-commerce with South Korea.” Korean sources indicate some agreements were reached on education, product certification services, and logistics. Park reportedly encouraged Alibaba to help South Korean companies enter China while Ma asked Park to support Alipay’s entry into South Korea (“S. Korean President meets with Alibaba’s Ma,” China Daily, August 19, 2014, http://www.chinadaily.com.cn/business/tech/2014-08/19/content_18446099.htm)

Yuhan-Kimberly, a South Korean joint venture between South Korea’s Yuhan and US headquartered Kimberly-Clark, and the Social Solidarity Bank announced each plans to donate 300 million won ($293,000) to launch a retail business for senior citizens, where over 70 percent of its workforce is expected to be staffed by seniors. The Korea Labor Force Development Institute for the Aged will be in charge operating the joint venture. Yuhan-Kimberly expressed hope that such initiative would create more jobs for senior citizens (Seo Jee-yeon, “Yuhan-Kimberly to fund retail business for seniors,” The Korea Herald, August 20, 2014, http://www.koreaherald.com/view.php?ud=20140820000843)

Labor strikes at Hyundai Motors’ Ulsan plant have made the company fearful of output losses. The refusal of workers to work overtime on weekends suggests Hyundai can expect a production loss of 150 billion won (US $147 million) this week alone. More aggressive worker demands followed in the wake of GM Korea and Ssangyong Motors’ decisions to incorporate bonuses and other benefits into ordinary wage payments. Hyundai is still awaiting its own court ruling regarding the implementation of a new wage scheme while being mindful that it suffered an estimated loss of 1.02 trillion won during last year’s 10-day strike (Lee, Ji-yoon, “Hyundai fears output loss from partial strikes,” The Korea Herald, August 22, 2014, http://www.koreaherald.com/view.php?ud=20140822000782)

Li & Fung, a Hong Kong-based global sourcing firm, is expected to report lower year-over-year profits for the first six months due to the unfavorable business climate in the United States and disruption resulting from anti-Chinese factory riots in Vietnam. Although the second half of the year has historically proved more profitable, analysts believe that the company’s overall annual performance is unlikely to recover since it already entered a three-year purchase agreement, which requires Global Brands Groups to purchase at least half of its sourcing from Li & Fung by the beginning of this year (Chim Sau-wai, “Trading group Li & Fung in store for subdued profits, say analysts,” South China Morning Post, August 18, 2014, http://www.scmp.com/business/companies/article/1575676/trading-group-li-...)

Following a session in Beijing, the Asia-Pacific Economic Cooperation (APEC) forum Economic Committee, held in conjunction with APEC meetings, announced an initiative to facilitate international regulatory cooperation on matters like global data standards that would enhance the flow of goods, services, and investment. Discussions built upon a draft “International Regulatory Cooperation Toolkit” presented by New Zealand that sought to give “‘policymakers and regulators practical guidance on the menu of options available when undertaking regulatory cooperation with other economies.” To further advance things, there was a workshop on best practices and different types of regulatory cooperation (APEC, “Reducing Regulatory Divergence Stimulates Open and Dynamic Trade,” August 19, 2014, <newsalert@apec.org>).

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.