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Low-cost manufacturing: the new benchmark of global competition

Geely and Chinese cars were not only the talk of Motown, but also the continent during the annual North American International Auto Show in mid-January in Detroit.


 


Although Geely’s sole economy model, the 1.5-liter Freedom Ship, did not make it on the main show floor at Cobo Center, it probably attracted more visitors on the press and industry days than any of the glitzy world premieres, or North American launches, or concept cars on display.


 


As the NAIAS opens to the public on January 14, Geely’s 900-square-feet pavilion and its show model, the CK7150, were gone. But the North American public and world automotive circles have much to read about and contemplate on China’s first appearance in Detroit.


 


Media: a threat down the road


 


The impact of Geely’s appearance at NAIAS can be seen from the headlines of some of the most important print and electronic media. 


 


Detroit views Chinese makers of spartan cars as a threat down the road,” writes the New York Times.


 


The flag dropped in Detroit today. The race is on and the Chinese are on their way,” CBS Evening News told American viewers during prime time on January 10. A day earlier CBS News reported that China was ready to crack the North American auto market. “The North American car industry – already facing slumping sales and profits, along with increased competition from Japan, South Korea and Europe – will soon have a new worry, China,” the report said.


 


Little car, big interest: China’s $10,000 Geely eyes U.S.” was the headline of the Detroit News. Car Guide titled its feature: “Made in China: clothes, TVs . . . and cars?” An internet portal article reads: “Chinese Geely revs at auto fair, U.S. industry shudders.”


 


Rooting against China syndrome” was the headline in the Detroit News written by a rather unfriendly columnist who wished that the Geely “car flops like a flounder.”


 


Geely’s owner and founder, Li Shufu, has gotten more than his money’s worth as an exhibitor through all of the free publicity offered by media representatives from around the world. 


 


Industry: a wake-up call


 


I walked past the Geely car and saw it from a distance,” Rick Wagner, CEO of General Motors told CBU/CAR during the Charity Preview. “It is difficult to comment. But as is the case with other automakers, it will be a long process to enter the North American auto market. But I have no doubt that Chinese-made cars will come,” Wagner said.


 


I think it’s the beginning, the very beginning, of Chinese participation in the U.S.,” Wagner’s deputy and GM’s product development chief Robert Lutz told the New York Times. With a little more candor, Lutz said “a few years down the road, sure, it’d be foolish not to see it as a threat.”


 


The only question is when,” DaimlerChrysler CEO Dieter Zetsche was quoted as saying. “The Chinese would be stupid not to do so. The Chinese are very intent on building a national auto industry. That is clear.”


 


The North American industry response to the price of the Geely car was surprise and shock. “Under $10,000? Impossible!” said one visitor. “Unbelievable!” said Katsuya Emoto of Toyota Autobody Co., Ltd. “Scary!” commented an executive from Omron. “$10,000? It’s really going to shake things up! How are we going to compete?!”


 


I’d like to buy this car for my kids to commute to college,” said a car dealer. “$10,000? You will sell tons of them. A lot cheaper than Japanese and Korean cars. I own a Hyundai franchise and they are a lot more expensive.”


 


An executive of a supplier company was knocking all around the body of the car and looking closely at the finish. “Solid?” “Absolutely,” he said. “The lines are good. I like the finish and the roof-top design. It looks similar to the Ford Taurus design a long time ago. It reminds me of the Honda 30 year ago when it first came out. But this is much more superior.”


 


This is the beginning of the end of the American auto industry,” he said. “I am a supplier. I will retire in three years. It does not concern me anymore.”


 


A nice little car,” said Jelani Aliyu, senior creative designer from GM. “The finish is good and the interior looks simple but contemporary.” Aliyu suggested that it would be better if the car was a little wider to make it sturdier. The tires can be larger to make it more attractive and the straight lines on the side of the car can be more obvious to give the car a stronger look.”


 


It has some tools in the trunk. This is really a neat design,” commented one visitor.


Said Jeff Nichols of Magna Cosma: “I am very pleased to see a Chinese car on display here. Why? It’s time that China wakes up and becomes part of the world. The coming of Chinese cars will wake up the American auto industry. But I believe it is going to be a win-win situation for the world.”


 


I want to buy this car if it is available,” said Jenny Hu, a Chinese-American engineer at GM. “I am Chinese and I want to buy a Chinese-made car. There is really nothing to see inside the show floor .”


 


If the people in Detroit say they are going to buy a Chinese car,” an executive told the editor, “it’s going to be a revolution. This is a good looking car. Detroit should have built such a model 10 years ago. It’s going to sell.”


 


The only problem may be political,” he added. “The people in Detroit and the politicians may set up a tariff barrier against dumping. There may be a trade war. But on the other hand, China holds a lot of U.S. securities. As former President Clinton said, you can’t quarrel with your banker,” he quipped.


 


There were plenty of industry visitors who suspiciously inspected the Geely car from inside out, testing the doors, opening up the hood to see the engine and transmission, feeling the paint and finish, and laughing at the inadequacies and problems that were easily identified with the Geely model built for the China market.


 


Remember, the first Toyotas were laughable,” Robert Lutz was quoted as saying. “The first Hyundai that we saw was laughable.” James Press, president and chief operating officer of Toyota Motor Sales USA said, “They laughed at us in 1967 when we showed them the Corolla.”


 


Although there was obvious doubts about high quality Chinese cars coming in large quantity to the North American market any time soon, CBS News quoted several U.S. industry analysts who believe that the coming of Chinese-made cars should be taken seriously. Said analyst Nick Margetts: “It’s a massive, massive country with a massive population and massive potential.”


 


Auto analyst Dennis Desrosiers said that the Big Three should pay attention. “It’s very symbolic. It says that Detroit has lost its way, that the future is a global auto sector, not a North American based auto sector. That’s what it really means.”


 


They’re buying engineering from Germany, design from Italy. They’re buying what they need around the world,” said Jean Jennings, editor of Automobile Magazine


 


The image of Chinese products in the U.S.,” acknowledged John Harmer, COO of Geely USA, “is not a positive one. But selling a base car at under $10,000 will create much interest among U.S. consumers.”


 


There are plenty of young families who don’t want to go into debt for five to seven years to have a safe, functional automobile,” Harmer said at Geely’s press conference. “Just don’t expect GPS,” he joked.


 


The Freedom Ship won’t be equipped with nifty gadgets but will be designed to run reliably for 10 years. “The platform comes from a Korean design that we paid for,” said Harmer, former lieutenant governor of California. “We contracted Toyota to design an engine, and we paid them for it.”


 


The modest Geely economy car in the concourse was in sharp contrast to the “high-tech vanity,” in the words of one visitor, of the Cobo Center show floor. But the arrival of a Chinese-made vehicle in Motown is creating a new low-cost benchmark in automobile manufacturing that may shake up the global auto industry.

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