JAC Chery integration suspense to be solved
The merger between JAC and Chery Automobile is often seen as a highly complementary combination in terms of business structure. However, the saying "a chicken head, not a phoenix tail" suggests that even seemingly perfect partnerships can face hidden challenges. The real issue lies in the underlying value and balance between the two entities—when one side is significantly stronger than the other, it can lead to imbalances that undermine the success of the integration.
Historically, successful mergers often involve a "strong and weak coalition," where one party is on the brink of collapse, and the other provides the necessary support. This was not the case with Chery and JAC at the time of their merger. Both companies were still in growth phases, which made the timing questionable from a strategic perspective. In 2008, both faced difficulties due to a downturn in the commercial vehicle market and setbacks in overseas sales. JAC's net profit dropped by 82.63% to 570 million yuan, marking one of its toughest years since establishment.
Despite this, JAC had not reached a point of total unsustainability. Its core products, such as Ruifeng commercial vehicles, light trucks, and passenger car chassis, remained competitive in their respective markets. By 2009, JAC's passenger car segment began to recover, with monthly sales reaching 11,000 units, which gave Jianghuai Automobile renewed confidence. Executives from Jianghuai repeatedly told reporters that “two companies in an upswing period cannot be merged,†suggesting that the timing wasn't right for a full-scale integration.
In contrast, Chery appeared more eager to push forward with the merger. Zhan Xialai, founder of Chery and former party secretary of Wuhu City, played a key role in promoting the integration. He was later appointed as the secretary-general of the Anhui Provincial Party Committee and led the provincial automobile industry initiative. There had been multiple attempts over the years, including in 1999, 2003, and 2006, to bring JAC and Chery together.
From the perspective of the Anhui government, the merger was part of a broader strategy to build a large automotive group capable of competing nationally. The province’s revitalization plan emphasized that only those with production capacities exceeding one million units would receive state support, while others risked being eliminated or merged. This provided a strong incentive for the integration.
Analysts have pointed out that the merger could create significant synergies. Chery excels in sedan production, while JAC has a strong foundation in commercial vehicles, including light and heavy trucks, as well as passenger cars. Their complementary strengths could drive mutual growth and efficiency.
However, the biggest challenge remains the organizational structure. Who will lead the merged company? How will the new hierarchy be formed? These questions remain unresolved. Additionally, the two companies have developed distinct corporate cultures over the years, leading to potential conflicts. If one side feels sidelined, the integration could fail, as seen in the case of Changan and Jiangling.
To address these issues, officials from Anhui Province have considered an approach similar to the Renault-Nissan alliance—first bringing the companies together, then gradually building collaboration through a loose coalition. This “airborne†method aims to break down barriers and foster cooperation before full integration.
With strong administrative support from the provincial government, the Chery-JAC merger has become inevitable. Both leaders must now find a practical and fair way to integrate their operations, rather than continuing to operate separately. The path forward requires careful planning, cultural alignment, and a shared vision for long-term success.
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