American Wheels, Chinese Roads: The Story of General Motors in China
by Michael Dunne
General Motors was bailed out by the American government two years ago, yet its China operations are thriving. Last year Detroit's biggest car manufacturer sold 2.35 million vehicles on the mainland (versus 2.21 million in the US) and plans to sell five million there by 2015.
Yet GM travelled 'a long, hard road' to create such success, says automotive industry analyst Michael Dunne in his intriguing, often enjoyable 227-page read.
Dunne is well-qualified to explain why. Raised in Detroit, he learned Putonghua, taught in Chongqing and spent two decades in automotive consultancy in Hong Kong and Shanghai. Now the president of investment advisory firm Dunne & Co, the author writes with executive-summary lucidity.
GM in the early 1990s wanted to 'open up' the China market 'but found the doors were shut tight'. It 'had to wait. And wait some more', he writes. But then mainland officials treated foreigners as building tools for their own automotive industry. The disdain was a reminder that China is 'the house at this casino', Dunne writes. 'You may enter and stay on our terms. If you choose to leave then you bear the consequences.'
Market entrants found more controls. 'You don't just walk into China and start selling Buicks,' you need a licence to build, sell, and to access 'every channel to money', Dunne warns. Undeterred, GM in 1992 formed a joint venture - 'at the wrong time and in the wrong place' - to produce Chevrolet S-10 trucks in Shenyang, Dunne recalls. The trucks were too expensive for farmers, too earthy for the rich and Shenyang was too remote. The lesson proved that foreign carmakers needed a supportive local partner with political clout, and to be in a city with 'decent' income from local sales, the author writes.
The city of Shanghai and GM opened talks but Ford was also in the running and, according to Shanghai Automotive Industry Corporation (SAIC) officials, 'out in front'. Dunne then explains simply how GM won with Brazilian help, and formed the 50-50 joint venture, Shanghai GM, in March 1997.
He highlights the cultural divide of a delicate partnership in which GM executives soon learned the difficulty of arranging meetings and the brawl of haggling over profits. Dunne reveals Chinese and American tactics, and how both sides reacted when GM chairman Jack Smith applied the bonnet release instead of the handbrake when he drove the first Buick Century off the Pudong production line in 1998.
GM wasn't a dummy, however. Dunne describes how Shanghai GM transformed the ageing Buick brand into China's must-have marque, improved dealer service and learned how state officials and the rich preferred cars with plusher, more spacious interiors and rounder bodies.
Dunne describes the bonding of the Shanghai GM partnership, the emergence of an entrepreneurial autonomy, and how its increasingly cash-strapped headquarters applied closer control. He recalls GM's annus horribilis of 2009, with its bailout and the sale of a crucial one per cent of Shanghai GM stock to SAIC. Dunne then cites the controlling partners' replacement of expatriates with less costly Chinese returnees, but skims over Shanghai GM's progress under local control.
This is an excellent read that should generate knowing nods and guffaws from old China hands, and prove an inspirational guide to newcomers.