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Mark O'Neill

Beijing court agrees to hear 80m yuan  lawsuit in which US company accuses mainland rival of stealing its technology

As a dispute intensifies between General Motors and its biggest potential Chinese rival, a court in Beijing has agreed to hear a lawsuit in which the United States firm is demanding 80 million yuan and a public apology for allegedly copying of one of its models.

An official of Beijing First Intermediate People's Court said yesterday it had taken over the case, first filed in an intermediate court in Shanghai last year. This follows a decision of the Supreme People's Court to transfer the case to Beijing, a sign of the importance the central government attaches to it.

In the suit, GM Daewoo accuses Chery Automobile of copying its four-door Daewoo Matiz and Chevrolet Spark passenger car to produce the QQ, which has become Chery's most popular model.

Daewoo put the Matiz on the market in South Korea in 1998 and in May 2003 GM Daewoo and Shanghai General Motors Wuling Auto signed an agreement to produce the Spark based on the Matiz.

The lawsuit is a sign of the seriousness GM attaches to Chery's ambitions to become a global player.

While the Chinese firm produced only 90,000 cars last year, it has signed an agreement with an American company to export hundreds of thousands of units to the US from 2007 and plans to export worldwide.

GM said its investigation found the Matiz and QQ cars shared remarkably similar body structures, exterior and interior designs, and key components. The vast majority of their parts  were interchangeable, it said.

GM never sold or licensed Matiz technology to Chery through authorised channels.

Rob Leggatt, a director of communications for GM Asia-Pacific, said GM Daewoo was asking for compensation of 80 million yuan for damages and the costs of litigation.

'We are asking that 'illegal income', which refers to income derived from misappropriation of our technology and other actions that are against Chinese unfair competition law in this case, be confiscated,' Mr Leggatt said.

Regarding the case's transfer from Shanghai to Beijing, he said GM had no reason to believe the change of venue favoured one party over the other. 'We are pursuing the case as planned,' he said.

A Chery official said the company was confident the judgment would be fair but declined further comment.

A salesman at Shanghai Jinhong, a sales agent for QQ, said the model differed from the Spark.

'The exteriors are similar but the interiors are completely different. Spark's components are imported and QQ's components are produced in China, so the price is substantially cheaper,' he said.

Since it went on the market in August 2003, the QQ has become Chery's most popular model. At about 30,000 yuan, it is one of the cheapest cars available and has sold 120,000 units.

The Spark, by contrast,  has found only 15,000 buyers in the mainland since hitting the market at between 45,000 and 60,000 yuan.

Sources said GM was challenging the QQ not only in the mainland but in foreign markets, with legal action in Lebanon and Malaysia aimed at stopping its exports.

On April 22, Chery held a global sales meeting in Shanghai, with 96 representatives from 32 countries. Its biggest export market is Syria, where it sold 4,000 models last year, up from 700 in 2003. It also has an assembly plant in Iran.

Last month, lawyers for GM wrote to a US firm planning to sell Chery cars from 2007 that it could not use the brand name in America, because it was too similar to Chevy, short for Chevrolet.

Malcolm Bricklin, the chief executive of Visionary Vehicles, plans to sell one million Cherys over five years. GM said it would oppose Chery's application to register the Chery name and would seek to prevent the import and sale of its cars.

Mr Bricklin has said that he would use the Chery name and was prepared for a fight with GM.



GM-Chery 'copy' row shifts into higher gear