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Chinese auto industry puts down roots in Detroit
Dozens of companies from China are quietly putting down roots in Detroit, part of the country’s steady push into the American auto industry.
Chinese-owned companies are investing in American companies and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring veteran engineers and designers in an effort to soak up the talent and expertise of domestic auto makers and their suppliers.
While starting with batteries and auto parts, the spread of Chinese business is expected to result eventually in the sale of Chinese cars in the United States.
“The Chinese are well behind the Japanese when they hit our shores 30 years ago,” said David E. Cole, a founder of the Center for Automotive Research in Ann Arbor, Mich. “They lack the know-how, and they’re coming here to get it.”
As businesses sprout up with little fanfare, Chinese companies seem to be trying to avoid the type of public opposition experienced by the Japanese auto makers Toyota and Honda in the 1980s, when the sudden influx of foreign cars competing head-on with cars from General Motors Co., Ford Motor Co. and Chrysler Group LLC was perceived as a threat to American jobs.
In contrast to the Japanese, Chinese auto companies are assiduously avoiding the spotlight. Last year, the biggest car maker in China, Shanghai Automotive Industries, opened new offices in suburban Detroit without any publicity, which is almost unheard of in an industry that thrives on media coverage.
But China’s growth in the American auto industry is drawing notice in Washington. Last year, the Obama administration filed a complaint with the World Trade Organization that China’s government was unfairly subsidizing the production of some parts shipped to America. And the country’s inroads into American-made batteries and electric vehicles have drawn scrutiny because that sector of the industry has been heavily subsidized by the U.S. government.
The American industry’s overall resurgence has drawn a growing Chinese population to Detroit. About 50,000 Chinese, many of them engineers and other professionals who work at GM and Ford, live in the metropolitan area.
Evidence of their new influence is sprinkled through civic activities, with community groups sponsoring youth soccer leagues, basketball tournaments and musical performances at Detroit Tigers games. One organization runs a Chinese soup kitchen every year at a local homeless shelter.
Business networks are growing, too. The Detroit Chinese Business Association boasts a flourishing membership, and counts about 100 Chinese-owned businesses, mostly auto-related, in the region. The Ford Chinese Association, with 650 white-collar workers, has become one of the largest employee groups at the company. Its president, Raymond Xu, recalled that in 1999, when he came to Detroit to attend college, there were very few Chinese in the area.
“I think people are going to get more and more comfortable with it,” Xu said.
Typical of the Chinese expansion are the nondescript offices of Changan Automotive in an industrial park in the suburban city of Plymouth. Changan, a major car maker in China, set up a research centre to better understand the structural chassis of a vehicle – then hired about 20 veteran Detroit engineers, some of whom had been laid off from Detroit’s auto companies, to staff the project.
“Most of the engineers are very young in China,” said Hong Su, the Changan executive heading the American facility. “They know how to make vehicles, but they don’t know how to develop them.”
One of his employees is Alan Wall, 54, a former contract engineer at Chrysler who lost his job during the recession.
“It was an opportunity,” he said. “And those tend to come from a company that is trying to expand.”
China already exports about $13-billion in automotive goods to the U.S. – tires, wheels and radios that are sold as replacement parts – according to AlixPartners, a consulting firm.
But many Chinese suppliers are pursuing direct business with the Detroit car companies, which now get many of their most common parts from low-wage nations like Mexico. One supplier, Brilliance Auto, an industrial giant with about 500,000 employees in the city of Shenyang in northeast China, is still an underdog in Detroit, trying to crack an intricate network of suppliers that have long relationships with GM and the other car makers.
“We have been exporting our parts to North America for 15 years for the aftermarket,” said Dongbin Chen, a Brilliance executive, referring to retail sales of replacement parts. “Now our biggest opportunity is with GM and the other big companies.”
Brilliance scored a coup last year by supplying lightweight engine mounts for the new Cadillac ATS sedan made by GM in Lansing, Mich., which has whetted the company’s appetite for more. At a U.S.-China conference held here, Brilliance displayed a large exhibit showcasing a range of mundane parts – including seat belts, steering wheels and shock absorbers – that it hopes to export to the U.S. “We have the ability and the capacity to supply these kinds of parts,” Chen said. “And I think right now, it is very important for us to be here.”
In addition to Chinese companies locating in Detroit, a cottage industry of lawyers, accountants and corporate advisers has grown up to assist them. Their numbers are small now, but the impact of the Chinese on the local economy is slowly expanding.
Industry analysts are hard-pressed to put a number on the Chinese suppliers operating in the U.S. “We simply don’t know how many there are,” said David Andrea, an official with the Original Equipment Suppliers Association, a trade organization for auto parts makers.
In one of the more prominent deals, the Wanxiang Group bought most of the assets of the battery maker A123 Systems, which filed for bankruptcy last year despite receiving $132-million of $249-million in federal grants to build two factories in Michigan. Congressional Republicans criticized the deal, saying A123’s technology could support military applications in China. Still, the buyout was approved this year by the Committee on Foreign Investment in the U.S., a federal government panel.
Wanxiang, which has its U.S. headquarters near Chicago, has acquired several American auto parts and solar companies in recent years. But it attracted little attention until it took an interest in A123 Systems.
“I wasn’t surprised by the negative reaction,” said Pin Ni, president of the company’s American unit. “The reality is we grow here like a small seed into a bigger tree, and we cannot avoid this type of response.”
He said that Wanxiang employed several thousand American workers, and kept local management in place at companies it had bought. “We act, talk and walk like an American company,” Ni said. “In the end, it’s all about making money.”
Other Chinese companies are averse to publicity. Shanghai Auto is the largest car maker in China and has major joint ventures there with GM and the German auto maker Volkswagen. But when the company opened its new Detroit-area offices last year, even GM was surprised.
“Since we do not do business with SAIC in the U.S., there is no connection between GM and the SAIC office in the U.S.,” said Dayna Hart, a GM spokeswoman.
The arms-length reaction underscores the sensitivity surrounding China’s presence in the American industry. Only about 4 per cent of Chinese-made light vehicles are exported now, mostly to countries in Africa and the Middle East. But the Detroit auto makers are bracing for the day when competitive Chinese cars hit the American market.
“The Chinese have a lot of money and they are moving fast,” said Cole of the Center for Automotive Research. “We’re going to see a lot more of them here.”
Unlike the densely populated Chinese neighbourhoods in cities like New York and San Francisco, the Chinese presence in the Detroit area is mostly scattered throughout the suburbs.
While Chinese cars still generate buzz at Detroit’s annual auto show, the growing Chinese population in the city attracts little attention.
At Ford, Chinese employees play an integral part in the company’s expansion in China, where it is building several new factories. They also help prepare American executives for transfers to China, and play host to Chinese car dealers when they visit Ford’s headquarters.
On Feb. 14, hundreds of Ford employees celebrated the Chinese New Year at the stately Dearborn Inn, which was conceived by Henry Ford in the 1930s as a replica of an early American village, with guest cottages that copied the homes of historical figures like Walt Whitman and Patrick Henry.
“We definitely see more openness to the Chinese culture,” said Xu, the Ford Chinese Association president. “We started small here, but we are coming on strong.”
