Economy
7:06 am
Wed April 25, 2012

Carmakers In China Rev Up As Industry Shifts East

Originally published on Wed April 25, 2012 6:24 pm

The Beijing auto show runs this week in what is now the world's largest car market, and a crucial one for Detroit companies.

General Motors just announced it will open 600 more dealerships in China, where it sells more cars than it does in the U.S. Last week, Ford announced construction of its fourth Chinese assembly plant.

For longtime American auto executives in China, witnessing the shift in the global auto industry is dramatic.

Every month, a group of auto executives gathers at a bar in the heart of Shanghai. They drink beer, swap industry info and talk about the wild ride that is China's car.

"Shanghai is the new Detroit," says Dan Collins of Port Huron, Mich. "They make a lot more cars here than in Detroit."

Collins, whose grandfather tested cars for Henry Ford, came to China in 1998 as a student from Michigan State. Back then, Chinese consumers bought just 1.5 million vehicles annually. Last year, that number was 18.5 million.

"You talk to anybody in the automotive industry, it's all China, China, China," Collins says.

CEO At 38

His career is a kind of classic, expatriate Horatio Alger story in China. Hired by Michigan-based auto parts maker Delphi, which was then the world's largest, Collins learned Chinese on the factory floor and rode the wave of the country's breathtaking economic growth.

"I originally planned to come for three months, but then I became a manager in only a year. I was an executive in less than five. So before I was 30, I was an executive in a major Fortune 500 company," Collins says. "That was something I never could have done in the United States."

Today, following a path neither he nor his grandfather could have imagined, Collins is the 38-year-old CEO of a Taiwanese company that makes brake discs.

He runs a factory in the city of Ningbo, just south of Shanghai, where he is the only native English speaker among 300 employees.

Collins says what makes China such an exciting place to work is the pace, challenge and unpredictability. It's a place where the industrial culture is still raw, so on any given day, you never know who you'll meet.

Collins recalls going to a scrap yard to negotiate a deal.

"They're basically run by local mafia bosses," he says. The boss "doesn't have his shirt on, [and] as I'm in the meeting discussing with him the pricing, he puts one of his workers in a headlock and wrestles him out the door. These are the kinds of things that happen only in China."

Chinese Encroachment

Jacob Schenkel worked for Delphi as well. He left after the company went bankrupt in 2005.

Later, he returned to work for an old Delphi subsidiary that made steering systems. But in a sign of the times, Americans no longer owned the division. It had been sold to the Chinese government.

"If three or four years ago, you said Chinese companies are going to buy U.S. assets, you would have scared people to death, because they are going to clean house," Schenkel says.

But he says working for a government-owned company isn't so bad. Chinese companies often buy foreign ones for technological know-how and to learn from foreign managers.

Schenkel says the Chinese government serves as the company's board of directors, but leaves management pretty much to the Americans.

He says his company and some auto joint ventures increasingly feel like hybrids.

"What's Chinese and what's foreign is blurred more than ever, and if you take Shanghai Automotive [Industry Corp., one of China's biggest automakers] and General Motors, it's hard to tell sometimes who's invested in who," Schenkel says.

Schenkel and Collins embody the shift from West to East. But foreigners are wary of working for Chinese car companies, says Michael Dunne, author of American Wheels, Chinese Roads: The Story of General Motors in China.

"It's tough. Many have tried and most have said: surrender," Dunne says.

He says the culture inside a Chinese auto firm can be combative, opaque and baffling.

"You've got to get ready for a fight, a battle every day, but time and time again, China's culture digs in and — more or less — spits them out," Dunne says.

A Future In China For Expats?

After incredible 33 percent growth in 2010, China's auto market has cooled. And there are some unsettling signs for foreign companies. Beijing is considering restricting government auto fleets to Chinese cars to help local companies.

"There's no doubt that China wants to have its own cars with its own brands and be the car factory for the world," Dunne says.

Most American expatriates in Shanghai return home after several years. But there are some, like Jacob Schenkel, who are in China for the long haul.

"I'll probably be here the rest of my life," he says.

It makes sense: Schenkel is from Chicago, but he got his MBA in Shanghai. He is married to a Chinese woman, and his professional experience is in China — where the car market is expected to grow for years to come.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, HOST:

Last week, Ford announced construction of its fourth assembly plant in China. That's the world's largest auto market now, and the bid for China's business is evident this week at the Beijing Auto Show.

Ford is not the only company looking to expand in China. As we reported yesterday, GM plans to open 600 more dealerships in that country, where it already sells more cars than in the U.S.

NPR's Frank Langfitt recently met with long-time American auto executives in China.

(SOUNDBITE OF CROWD CHATTER)

FRANK LANGFITT, BYLINE: Every month, a group of auto execs gathers at a bar in the heart Shanghai.

(SOUNDBITE OF CROWD CHATTER)

LANGFITT: They drink beer, swap industry info and talk about the wild ride that is China's car market.

DAN COLLINS: Well, Shanghai is the new Detroit. They make a lot more cars now in Shanghai than they do Detroit.

LANGFITT: Dan Collins is from Port Huron, Michigan, northeast of Detroit. His great-grandfather tested cars for Henry Ford. Collins came to China in 1998 as a student from Michigan State. Back then, Chinese bought just a million-and-a-half vehicles annually. Last year, that number was 18.5 million.

COLLINS: You talk to anybody in the automotive industry, it's all China, China, China.

LANGFITT: Collins' career is a kind of a classic, expatriate Horatio Alger story here. He hired on in China with Delphi, the Michigan-based auto parts maker, which was then the world's largest. Collins learned Chinese on the factory floor and rode the wave of the country's breathtaking economic growth.

COLLINS: Basically, I originally planned to come for three months, but then I became a manager in only a year. I was an executive in less than five. So before I was 30, I was an executive in a major Fortune 500 company. So that was something I never could have done in the United States.

LANGFITT: Today, following a path neither he nor his grandfather could have imagined, Collins is now the 38-year-old CEO of a Taiwanese company that makes brake discs. He runs a factory in the city of Ningbo, just south of Shanghai, where he's the only foreigner among 300 employees. Collins says what makes China such an exciting place to work is the pace, challenge and unpredictability.

China's industrial culture is still pretty raw, so on any given day, you never know who you're going to meet.

COLLINS: I got into the scrap yards to negotiate some deals, and they're basically run by local mafia bosses. And you go to a meeting with him, and he doesn't have his shirt on. As I'm in the meeting discussing with him the pricing, he puts one of his workers in a headlock and wrestles him out the door. These are the kinds of things, you know, that happen only in China.

(SOUNDBITE OF LAUGHTER)

JACOB SHENKEL: My name is Jacob Shenkel.

LANGFITT: Shenkel worked for Delphi, as well. He left after the company went bankrupt in 2005. Later, he returned to work for an old Delphi subsidiary that made steering systems. Only now, in a sign of the times, the division wasn't owned by Americans anymore. It had been sold to the Chinese government.

SHENKEL: If three, four years ago you had said Chinese companies were going to start to buy U.S. assets, you would have scared people to death, because they were going to clean house.

LANGFITT: But Shenkel says working for a government-owned company here isn't so bad. Chinese companies often buy foreign ones for technological know-how and to learn from foreign managers. Shenkel says the Chinese government serves as the company's board of directors, but leaves management pretty much to the Americans. He says his company and some auto joint ventures here increasingly feel like hybrids.

SHENKEL: What's Chinese and what's foreign is blurred more than ever. And if you take, like, Shanghai Automotive and General Motors, you know, it's hard to tell sometimes who's invested in who, or who's partners how with what.

LANGFITT: Shenkel and Collins embody the shift from West to East. But foreigners are wary of working for Chinese car companies.

MICHAEL DUNNE: It's tough. Many have tried, and most have said surrender.

LANGFITT: Michael Dunne is the author of "American Wheels, Chinese Roads: The Story of General Motors in China." He says the culture inside a Chinese auto firm can be combative, opaque and baffling.

DUNNE: You've got to get ready for a fight, a battle every day, but time and time again, China's culture digs in and more or less spits them out.

LANGFITT: After incredible 33 percent growth in 2010, China's auto market has cooled. And there are some unsettling signs for foreign companies. Beijing is considering restricting government auto fleets to Chinese cars to help boost their market share. Again, Michael Dunne.

DUNNE: There's no doubt that China wants to have its own cars with its own brands and be the car factory for the world.

(SOUNDBITE OF CROWD CHATTER)

LANGFITT: Back at the bar, another pizza is up, and Shenkel is talking about the future. I ask the question expats always ask in China: How long do you think you'll stay here?

SHENKEL: I'll probably be here the rest of my life.

LANGFITT: It makes sense: Shenkel's from Chicago, but he got his MBA in Shanghai. He's married to a Chinese woman, and almost all of his professional experience is here, where the car market is expected to grow for years to come. Frank Langfitt, NPR News, Shanghai.

(SOUNDBITE OF MUSIC)

INSKEEP: You are listening to the program that brings you insight on a changing world, whether the story is in Detroit or in Shanghai. We're glad you're with us on this local public radio station, and we'd like to remind you that you can follow us throughout the day on Facebook and on Twitter. Our Twitter handles include @MORNINGEDITION and @NPRInskeep. Transcript provided by NPR, Copyright NPR.