Chinese partner of GM strikes = out on its own - Print Version

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Chinese partner of GM = strikes out=20 on its own

By Keith Bradsher The New York Times =

TUESDAY, APRIL 11, 2006 =

HONG=20 KONG The Chinese joint venture partner of General Motors and = Volkswagen=20 on Monday announced details of plans to sell its own cars in China this = year and=20 export cars next year to Europe.

The plans highlight how Chinese=20 companies, no longer satisfied with using cheap labor to manufacture car = designs=20 from the United States, Germany and Japan, are determined to turn into=20 international competitors in their own right and are relying on Western=20 technology transfers to do so.

The Chinese partner, Shanghai = Automotive=20 Industry Corp., or SAIC, is China's second-largest automaker, behind = First=20 Automotive Works, on the strength of its 50-50 joint ventures with GM = and=20 Volkswagen.

The Chinese company announced Monday that it had set = up a=20 wholly owned subsidiary, SAIC Motor, that would not have a foreign = partner and=20 would invest $1.25 billion in building research and development centers, = a car=20 assembly plant and an engine factory.

SAIC Motor is staffed by = what the=20 company described in a statement as "industrial elites" who learned the = business=20 working in joint ventures with GM and Volkswagen executives. Wang = Xiaoqiu, who=20 worked for the Shanghai VW joint venture for 14 years and was in charge = of=20 quality supervision there, has become the general manager of SAIC=20 Motor.

At a news conference in Shanghai, Wang set a target of = selling=20 more than 200,000 of its own cars by 2010, 45,000 of them overseas, = Reuters=20 reported.

He also used a Chinese saying to underline the desire = of=20 Chinese auto executives to control their own destiny by striking out on = their=20 own instead of trying to gain greater influence within joint ventures in = which=20 foreign automakers usually make the crucial decisions.

"A = housekeeper can=20 never replace a master," Wang said.

Multinationals like GM, = Volkswagen,=20 DaimlerChrysler, Ford Motor, Honda Motor, Toyota Motor and Nissan Motor = have=20 traditionally tried to sell older models in developing countries, = shipping aging=20 equipment from factories in their home markets. But fierce competition = in the=20 Chinese market and pressure from Beijing have prompted them to transfer = their=20 latest designs to China, introducing the same models within several = months of=20 their introduction in industrialized countries.

SAIC made clear = in a=20 statement how much China has gained from the = multinationals.

"With their=20 manufacturing plants relocated to China, the technical and R&D = properties=20 are also being transferred to China," it said. "The trend has furnished = China=20 with conditions and opportunities to independently develop its own = international=20 brands."

SAIC Motor said its "short-term plan" called for it to = have=20 1,000 engineers and technicians involved in research and development, = along with=20 a capacity of 120,000 family vehicles and 170,000 engines.

The=20 medium-term plan is to have 4,000 engineers and technicians and, by = 2010, to=20 have a capacity of 300,000 vehicles - equal to a tenth of China's market = now but=20 probably a smaller share by then - and 400,000 engines.

Wang said = the=20 company intended to market 30 models derived from five basic structural = designs,=20 selling for $8,125 to $37,500.

Volkswagen entered the Chinese = market in=20 1985 in partnership with SAIC and was dismayed a decade later when the = Chinese=20 government assigned GM the same partner for its entry into the Chinese=20 market.

Multinational companies have long tried to avoid sharing = joint=20 venture partners in overseas markets, for fear of losing trade secrets. = But they=20 have had little choice in China because of a limited number of large = Chinese=20 automakers available as partners and because of the government's = requirement=20 that foreign automakers not take more than a 50 percent stake in any = assembly=20 operation.

Having a joint venture partner that sells its own line = of cars=20 can also raise intellectual property concerns.

GM's predicament = worsened=20 in the past three years as Chery Automobile, in which SAIC held a 20 = percent=20 stake, introduced the Chery QQ, a $4,000 subcompact car that is = practically=20 identical to GM's Chevrolet Spark, based on a design from GM's Daewoo=20 subsidiary.

SAIC ended up selling its stake in Chery, while Chery = settled=20 on secret terms a lawsuit filed by GM and did not admit any wrongdoing. = The=20 Chery QQ remains on the market.

Volkswagen said Monday that it = understood=20 and supported SAIC's desire to produce its own cars.

GM's = longstanding=20 position is that China's auto market is growing fast enough to = accommodate more=20 manufacturers but that both GM and SAIC value their joint venture. GM = declined=20 Monday to elaborate on its position. =