Advance Praise For American Wheels, Chinese Roads The Story of General Motors in China

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3 Advance Praise For American Wheels, Chinese Roads The Story of General Motors in China I ve shared many experiences with Michael Dunne on the front lines of China, and Michael knows China and the automobile market unlike anyone else I ve met. His personal adventures and experiences give him a brilliant insight into an American icon s journey into China. He chronicles it with intrigue, analysis, drama and humor. You can t put it down! James D. Power IV Former Executive at J.D. Power and Associates and Co-author of Satisfaction: How Every Great Company Listens to the Voice of the Customer Michael Dunne has done a superb job of chronicling and analyzing the very important and complex business story of GM in China. He has done this based on his boots on the ground experience of many years in Middle Kingdom and his great depth of understanding of the global auto industry. As we increase the speed of globalization, it is imperative to understand the many complex issues involved from the importance of personal relationships to understanding diverse cultures to even have a chance for success. The deep insight into the high stakes drama in the GM China story reaches well beyond the auto industry and, perhaps, well beyond China. Consequently this is a must-read for all who are involved in global commercial activities. David Cole Chairman Emeritus, Center for Automotive Research American Wheels, Chinese Roads is a fascinating portrait of GM s rocky road to success in China. Author Michael Dunne takes you on a wild ride, chronicling the failures, the successes, and the sheer random luck of an American company trying to seal the deal with the Chinese. Dunne s access is unprecedented, his sources second-to-none. This is a book not only about the transformation of an American icon, but about China, revealed in all its complicated beauty. Rob Schmitz China Bureau Chief, Marketplace/American Public Media

5 The Story of General Motors in China

7 The Story of General Motors in China Michael J. Dunne John Wiley & Sons (Asia) Pte. Ltd.

8 Copyright 2011 by John Wiley & Sons (Asia) Pte. Ltd. Published in 2011 by John Wiley & Sons (Asia) Pte. Ltd. 1 Fusionopolis Walk, #07 01, Solaris South Tower, Singapore All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons (Asia) Pte. Ltd., 1 Fusionopolis Walk, #07 01, Solaris South Tower, Singapore , tel: , fax: , enquiry@wiley.com. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought. Neither the authors nor the publisher are liable for any actions prompted or caused by the information presented in this book. Any views expressed herein are those of the authors and do not represent the views of the organizations they work for. Other Wiley Editorial Offices John Wiley & Sons, 111 River Street, Hoboken, NJ 07030, USA John Wiley & Sons, The Atrium, Southern Gate, Chichester, West Sussex, P019 8SQ, United Kingdom John Wiley & Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario, M9B 6HB, Canada John Wiley & Sons Australia Ltd., 42 McDougall Street, Milton, Queensland 4064, Australia Wiley-VCH, Boschstrasse 12, D Weinheim, Germany Library of Congress Cataloging-in-Publication Data ISBN (Hardcover) ISBN (epdf) ISBN (Mobi) ISBN (epub) Typeset in 11/14 Sabon Roman by MPS Limited, a Macmillan Company Printed in Singapore by Saik Wah Print Media Pte. Ltd

9 I dedicate this book to my parents: Janet for the lilt of her Irish laughter. And Jim, for inspiring the pursuit of a road less traveled.

11 contents Acknowledgments ix Introduction 1 Part One Rules of the Chinese Road 5 1 Scaling New Heights 7 2 Many Detroits 13 3 Getting a Foothold In Quicksand 17 4 The Back Door 23 5 The Hook 31 6 A Reality Show 41 Part Two Pole Position, Yellow Flags 51 7 The Kit Price 53 8 Putting Shanghai First 65 9 Signing the Deal Two Sons 81 Part Three Negotiating the Obstacle Course The Launch Fiefdoms Paper Cups The Chery Surprise 125 vii

12 viii contents 15 Porsches and Sweet Potatoes Getting Their Arms Around China 147 Part Four Quick Acceleration, Then a Tight Corner The Best and Worst of Times Miniature Vehicles A Chill Wind The Favor 179 Part Five The End of the Beginning A Memory Palace The Great Tide Electric Cars and Elevators 205 Conclusion: The End of the Beginning 213 Index 219

13 acknowledgments I was making my way up six flights of concrete stairs to our Shanghai apartment in the old French Quarter one evening in 2005, briefcase in one hand and Chinese grocery bags slipping from the other, when the thought first came to me: there must be a story here. It wasn t until 2009, though, that I was ready to turn my twenty years of experiences in China into a book. But how? I had already developed an expertise in China s car market through my company, Automotive Resources Asia. Could there be a connection between my first-hand experiences in China and the car business? No, China was China and cars were cars. Two entirely different subjects. The book idea got stuck. That s when other people started to make things happen. First came this simple advice from my father, Jim Dunne: Write it down. And so I started to record little episodes, the telling details, even though I had no idea what the book would be about. It continued that way for months, until after a morning coffee meet in Singapore Sylvia McKaige of CNBC introduced me to Wiley Asia. Nick Melchior at Wiley worked with me to channel my stack of notes into a business book about GM in China. I was off and running. Well, not so fast. It is one thing to want to tell what you saw. It is quite another to do it in a way that makes the reader want more. Editors Chris Endres, Kristi Hein, and Debbie Mettenleiter suggested adjustments that improved clarity and flow in huge ways. General Motors helpfully arranged site visits and many key interviews. Scores of other industry executives, many of whom wish to remain anonymous, contributed invaluable first-hand accounts. That little devil called doubt has a way of slipping uninvited into a writer s lair from time to time. When that happened, the following talented people stepped in to deliver shots of ix

14 x acknowledgments encouragement and solid advice: John Bonnell, David Collins, Patrick Cranley, Timothy Dunne, Lauren Giglio, Paul Ingrassia, Kerry Ivan, Tina Kanagaratnam, Marian Knappert, Linda Lim, Jane Lanhee Lee, Paul Lienert, Mark Leonard, Geoff Liu, Richard McGregor, Jerry Powers, Frank Rocco, Matthew Schroeder, Paul Stepanek Frances Bauer, Julie Dunne, Patricia Dunne, and Mary Jo Finkenstaedt. During the journey of my giving life to this book, my wife, Merlien, gave birth to our second child Aurelia and then to our third child, Connor. In a blink of time, our three-year old, Raphael, was joined by a sister and brother. I am forever grateful to Merlien for being an ocean of serenity in the midst of a beautiful storm of chaos at home.

15 INTRODUCTION Taking the first step is so sublime, so enthralling, so utterly enticing that no businessman can resist. The tree-lined, flower-petaled path lures you, like a moth to the light, to the shining entrance of the world s most promising marketplace: China. As you approach the gates and prepare to pass through into this lucrative and boundless market, you discover that they are locked. Never mind looking for a key. These forbidding gates can be opened only from the inside. You must be invited to enter. And then you may proceed only in the company of a chaperone. This isn t a dream sequence. This is the reality of doing business in China. General Motors found itself in just this position in the early 1990s. It wanted to open up the China market, but found that the doors were shut tight. Government officials in Beijing had already issued joint venture car production licenses to a handful of companies, including Chrysler and Volkswagen. But GM had to wait. And wait some more. As a student intern at GM headquarters in Detroit in the summer of 1989, I witnessed the waiting period firsthand. I was assigned to devise a distribution strategy for China just in case, one day, China decided to invite GM inside. GM s own culture was crystallized for me in one unforgettable moment when I was preparing a presentation to the higher-ups at the end of my eight-week tenure. My supervisor walked through the report and then offered only one piece of advice: Whatever you do, just make sure to C-Y-A. C-Y-A? 1

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THE POWER OF JAPANESE CANDLESTICK CHARTS Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offi ces in North America, Europe, Australia and Asia,