Sunday, July 27, 2014

U.S. Car Companies Set to Win Big in China?

Faced with slowing economic growth, China's authorities have come up with the time-honored (dishonored?) solution of facilitating the creation of more debt. In the most recent case, China has opened up the asset-backed securities, or ABS, market to foreign car companies in an attempt to stimulate growth in the sector. In the near to midterm this looks like good news for a car company like Ford Motor Company , and also for car parts suppliers like Johnson Controls  or Visteon  .



What happened in China?
The move by the China Banking Regulatory Commission to allow foreign car companies to issue ABS is going to enable companies like the finance arms of Ford, Volkswagen, BMW and Toyota, among others, to start to challenge local banks in the issuance credit. ABS products are bundles of loans (in this case car loans) that are packaged and then sold on to other investors. Issuing ABS helps car finance companies because they are able to transfer risk and issue more loans to car purchasers.


READ THE FULL ARTICLE LINKED HERE