'American Wheels, Chinese Roads' is essentially a chronological accounting of G.M. in China. The story is interesting because it is well told, explains how G.M.'s China subsidiary set sales and profit records while the parent company raced towards 2009 bankruptcy, and offers insight on how China manages foreign businesses.
G.M.'s partner in China is a subsidiary of the City of Shanghai - SAIC (Shanghai Automotive Industrial Corporation). SAIC also competes with G.M. in China by partnering with VW to produce a 1984-design VW Santana, and producing its own brand - Roewe. All three product lines are built in Shanghai.
G.M. began pursuing production in China in 1989; in 1999 SAIC-G.M. began production. In between, the Chinese played G.M. and Ford against each other; ultimately SAIC was persuaded by Buick's prior luxury image and G.M.'s history of local management at its Brazil plant. G.M. now competes with 50 other car-makers for the 11 million or so cars sold (2010), up from 640,000 in 2000. SAIC-G.M. built over 1 million cars that year (more than G.M. in the U.S.), and reaped almost $1 billion in profits.
Author Dunne tells readers that everything in China starts with a license - to build cars, sell cars, import product, export product, change yuan into dollars, become listed in a stock exchange, etc. To get a license, foreign firms must first get a partner - usually a city or provincial government. Shanghai requires at least $140,000 in capital funds from foreign companies to be deposited in a bank, where it remains until the enterprise is formally closed and any audits completed. Shanghai takes half the profits from SAIC-G.M. manufacturing, as well as half of service profits as well, for products jointly developed. As of 2010, Shanghai had the highest minimum wage - $164/month, plus pension, housing, medical care, and unemployment insurance. Locales an hour away have a $105/month minimum wage.
These business licenses are not permanent - thus, companies are always on a short leash that requires them to continually be useful to the government. (No "What's good for General Motors is good for the country" here!) Example: Every taxi in Shanghai is a VW Santana. Taxi operators don't have to buy a Santana, but doing so helps insure license renewal. Similarly, In Beijing, the taxi fleet is dominated by Hyundai Electras (the Chinese partner must have at least 50% ownership, and is always listed first), built by Beijing-Hyundai. In Wuhan, the taxi fleet is made up of Citroens, made there. There are now six major 'Detroits of China,' and many minor ones. Partnerships with foreign brands comprise 70% of sales; 95% of cars sold in China are made in China - imports are hit with a 150% tariff.
G.M.'s first venture in China was a disaster - building S-10 trucks with old equipment for a market generally unable to afford them. The Cadillac CTS flopped as well - too small, gas-guzzler. The 'good news' for G.M. is that Ford and VW were inattentive, Japan (Toyota) and China have long-term animosities - leaving G.M. an opening. G.M. then bought back bankrupt Daewoo (Korea) that it formerly owned for $400 million cash to get its small car expertise to design vehicles for the Chinese market. Found that roomy vehicles with small (1.2 or 1.4 liter) engines and fancy interiors were the most popular.
Chery Auto in China made a near perfect replica of the Chevy Spark 6 months ahead of Chevy and for 20% less - Dunne believes former Daewoo employees sold the drawings to Chery --> 'QQ' model that sold 5X as well as the Spark. Chevy's latest China product, Sail, was developed by Shanghai-G.M., with no royalties, etc. owed G.M. There now are only 45 Americans employed at Shanghai-G.M.
Subsequent to Dunne's book, Automotive News China reported that SAIC-G.M.-Wuling (the latter being a new 5.9% partner;SAIC has a 50.1% share, G.M. 44%) will start building Chinese-designed 5-seat and 8-seat microvans shipped as kits from China. They will be sold in India under the Chevrolet brand, instead of the Wuling brand as they are in China. Starting price will be at $7,000. The group is already China's largest microvan producer. The price in China is $4,400 - recently dropped because of a sales slowdown due to government ending its stimulus programs and local authorities restricting purchases to curb highway congestion; about $138 in profit is earned for each vehicle, per J.D. Power.
A Note of Warning: Dunne's material is informative and interesting; however, he's a bit loose in how he framed some of his statistics on costs, profit- and revenue-sharing, etc. and one should be leery in taking all of them literally.