The Truth About Cars » GAF Chengdu The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sun, 13 Jul 2014 22:36:48 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » GAF Chengdu Everybody Is Talking About Life After Opel Fri, 07 Sep 2012 13:53:10 +0000

Opel must feel like someone who’s on his deathbed, surrounded by relatives who muse how much the organs will fetch. After we ran our piece on Detroit rumors about Opel and PSA, everybody started to weigh in on the issue. The recommendation by a Wall Street analyst that GM should “dump Opel” made headlines around the world. The Economist mused aloud what an “Opel-less future” would be like.

Even here in Chengdu, China, Opel was given up for dead.

“Will GM walk away from Opel?” asked one of the slides of Pulitzer Prize winning Paul Ingrassia, Deputy Editor-in-Chief of Reuters, as he gave his presentation at the Global Automotive Forum. Said Ingrassia:

“You almost have to wonder: will GM find a way to sort of walk away from Opel? I don’t have any inside information, but clearly Opel is a major drag on General Motors right now. General Motors’ market share is slipping a bit in the United States, and of course that has to be a concern for General Motors when it faces the difficulties at Opel.”

Chinese companies were interested in Opel when it was for sale in 2009, and last year, Beijng’s BAIC was still rumored to be hot for Opel’s corpse. A Opel would be worth much more to a Chinese company than to anyone elsewhere. With a stable of certified cars, and racks of intellectual property, Opel could be the key to developed international markets that currently pretty much remain locked to Chinese carmakers. Several times today, Geely was praised for having done a good job with Volvo so far, and, said Ingrassia, “I would expect to see more Chinese acquisitions of automotive properties in Europe and North America, especially of distressed companies.”

Walking away from Opel could provide the badly needed lift for the GM stock. Morgan Stanly calculated that cutting off Opel could add nearly $1.00 a share to GM’s earnings and could drive the GM stock up by 50 percent. The idea that Opel could be taken out and shot lifted GM’s shares by 3.4 percent to $22.49 on Thursday.

Meanwhile in Germany, new Opel CFO Michael Lohscheller put on a brave face and told Reuters that “GM signaled its clear support of Opel to me and has a great understanding for the situation in Europe.”  That lukewarm statement is not enough to stop the premature eulogies. Says the Economist:

“Selling Opel would be painful but, as Morgan Stanley notes, Daimler did right when it accepted the pain involved in cutting itself loose from Chrysler (which is now doing well and keeping its new owner, Fiat, afloat); and likewise BMW when it rid itself of Rover. In retrospect both firms benefited from cutting their losses. It is hard to avoid the conclusion that GM would too.” 

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Deep Throat: GM-PSA Deal Doomed, Girsky Tired, Wants Home. Experts: Sell Opel Already! Thu, 06 Sep 2012 15:53:05 +0000

Rubbing shoulders with industry types displaced to a Chinese city called Chengdu has its good parts. You hear stories you normally don’t see in a press release. An executive who works for the western partner of a large Chinese joint venture told me today that my story about Chinese interests killing the Opel deal between GM and PSA wasn’t true. At least not completely. As so often, in the denial was a much more interesting story. After another drink for encouragement, said executive told me very much off the record that GM is tired of the PSA deal and wants out. If that means leaving Opel for dead, so be it.

According to this executive,  GM feels it wasn’t told the whole story before it dumped  $423 million into PSA to buy 7 percent of the moribund company, and that PSA did not disclose the full extent of the troubles the French were in.

Also according to the executive, Steve Girsky recommends to call the PSA deal off, on grounds that PSA did not open the kimono wide enough.

As a matter of fact, says the executive and orders another one of what the Chinese in Chengdu may be drinking, Steve is pretty tired of the Opel and Europe mess.

If calling off the PSA deal pulls the last hose out of the German Opel patient, so be it. The PSA deal was praised as one of those “win-win” situations, where both could get rid of over-capacities and save much needed money.  Since 1999, GM’s European arm has lost $16 billion.

The line that Buick & China were against the platform sharing is a semi-truth, says the now very relaxed exec. Of course they were not happy. But their opposition was a convenient reason to call-off the platform sharing, which would kill the whole deal elegantly and without anyone having to raise a big stink.

Early August, it was reported that GM may have to write down the PSA investment if it won’t turn for the better.  On Monday, German media revealed that a deal between Opel and PSA that called for sharing of the Insignia platform was called off. Opel denied there ever was a deal.

Possibly, TTAC has become a target of the dreaded leaks. Who knows. I went to my hotel room to get some Chinese cash. Gotta go back to the bar.

PS: Meanwhile, Reuters reports from Detroit that “selling or otherwise divesting its money-losing Opel unit in Europe” is GM’s best option. That according to Morgan Stanley analyst Adam Jonas who sees no end in Opel’s losses, and that exiting Opel could be the best move. He doesn’t think GM would make any money selling Opel, quite the opposite. He figures it could cost GM up to $13 billion, money needed to convince a buyer to take the hot potato, and to fund Opel’s pension obligations. Says the analyst:

“One of the worst things in the auto industry is owning a cash-burning, resource-consuming business. We believe the time has come for GM to find a new home for Opel.”

The Detroit Free press quotes “experts, including lead analyst Adam Jonas,” who recommend a “separation” of GM and Opel. The Detroit News toots into the same horn.

GM spokesman Jim Cain denied that Opel is for sale, telling Reuters  that “despite the tough environment for the automotive business in Europe, we believe we have an opportunity to turn the Opel/Vauxhall business around and bring it back to long-term profitability.”



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Nissan’s Shiga: Tensions Over Islands Hurt Chinese Sales Of Japanese Cars Thu, 06 Sep 2012 15:28:53 +0000

The hordes of Chinese and Japanese reporters roaming the halls of the Chengdu Global Automotive Forum in Chengdu were not really interested in exports. They were sniffing blood. There are tensions between China, Japan, and a few other countries over some rocks in the sea. The rocks are called Diaoyu by the Chinese, Senkaku by the Japanese, and choice words by many others. Nissan’s COO Toshiyuki Shiga sat on the podium, next to the always photogenic Atsushi Niimi. The Japanese were flanked by a BAIC president and a Dongfeng CEO. The reporters wanted to know: How bad is it?

Shiga says the tensions have “some impact.” As things stand, Nissan would rather not risk going outdoors.

“It is very difficult to conduct big sales promotional campaigns, especially promotional events outdoors. Overall, not only for Nissan but also all Japanese makers, we have been hit by a drop in sales, especially August sales. That means there is some impact,” Shiga told Reuters reporter Norihiko Shirouzu, who arrived at the conference in full riot gear, black jeans and t-shirt. Shiga told the same to Bloomberg’s Liza Lin, who also arrived in a black number, albeit a much more elegant one than Shirouzu’s duds. Toyota’s Niimi ducked the reporters.

Many cities saw anti-Japanese demonstrations, and there are Twitter-style calls for boycotts of Japanese goods. A Japanese embassy vehicle in Beijing was stopped by two cars, and the meatball pennant was ripped off. Two men were arrested and fined with five days in jail, writes The Nikkei [sub].

A white Infiniti and a black Toyota  were parked outside of the Chengdu conference center without causing riots.

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Chinese Car Exports: Not Yet, We have to Euthanize “Backwards Car Companies” First Thu, 06 Sep 2012 15:27:12 +0000

There is one thing about the Chinese car industry that can’t be said often enough: It is learning fast. A year ago, the recurring theme at the Chengdu Global Automotive Forum was brands, brands, brands. This year, nobody talks about new brands anymore. The only one who does is the CEO of Dongfeng, one of China’s largest automakers. He says last year’s brand binge was misguided, “irrational, incompetent, and immature.”

At this year’s Global Automotive Forum in Chengdu, the gateway to China’s wild west, Zhu Fushou admonishes the room that “brands don’t happen overnight.” Instead, he recommends that Chinese companies “acquire foreign carmakers in the U.S. and Europe.” A message that makes investment bankers in the room, and there are many, immediately whip out their Blackberrys.

The tone at this year’s Chengdu Global Automotive Forum in Chengdu definitely is more subdued, and more professional. Did I mention they learn fast?

If “brands, brands, brands” was the recurring theme of last year’s conference, this year, it’s the big slowdown. The Chinese bubble did not burst as many prophesied, it slowly deflates to what Zhu calls “micro growth,” or single digits to none. He actually predicts that China will be in micro growth mode for the next 10 years.

If Chinese companies want growth, they have to go abroad and look for it. It will be a tough job.

Chinese exports still are quite low, about 5 percent of total production. Where Chinese cars made inroads, they run into serious roadblocks. Russia and Brazil, the “B” and the ”R” of the BRICS, demanded that carmakers invest locally, or get hit by delirious custom duties for imports. Chinese companies did not get the message. They finally did after they were devastated both in Russia and Brazil, to the effect that China “contemplated exiting the market completely,” as Commerce Ministry Deputy Director Zhi Luxun says. Zhi has uncomplimentary words for the products the Chinese car industry tries to sell abroad. Too much focused on price, lacking in quality and aftersales service. If a Chinese functionary says that …

The exports usually come from “backwards companies,” as Donfeng’s Zhu calls China’s second and third tier car companies. They won’t be around for much longer, thinks Zhu. China’s planners will “withhold resources,” and the backwards companies will die a more or less natural death, if they don’t want to become part of a “withdrawal mechanism” that leads to consolidation among a few large carmakers, Zhu says.  Once that is done, then China will become another Germany, Japan, or Korea that export more than half of their domestic production. Both Zhu and Zhi are sure that it will only be a matter of time.

But it won’t be next year in Chengdu.

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Not Quite Live From Chengdu Fri, 14 Oct 2011 09:55:27 +0000


My fleeting 15:21  minutes of dubious fame.

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Our Daily Saab: Chengdu Noodles Fri, 14 Oct 2011 08:55:41 +0000


There was no better place to clear up some questions about Saab than in Chengdu. After all, nowhere can you find the CEOs of all major Chinese carmakers and government officials all under the same roof, or even at your dining table. There also was no better place to get entangled in the messiest web of facts and fiction. Here is some local color:

When on stage, nobody made any public announcements or mentions of Saab. Even when a lone moderator of a group discussion dared to say that “Saab certainly is a hot story,” he was ignored by Pangda’s chairman Pang Qinghua, who was one of his panelists.

Did I say no one? I lied. Representatives of BAIC, from Chairman Xu Heyi on down, never missed a chance to weave Saab into public comments. It was usually branded as “cooperation.” Once, the “cooperation” mutated to “joint venture,” but that could have been a slip of the simultaneous translator. BAIC had bought tooling of previous generation Saabs, and appears to be quite happy with what they received.

Any remarks coming from Chengdu were made, as they say, “at the sidelines of the conference.” When Chairman Pang had said “now that Saab is in bankruptcy protection, all previous pacts are invalid. It’s up to the court to decide. It can also find a new partner,” he had said it. The quote still sits on the little black recorder Reuters reporter Fang Yan had stuck in Pang’s face. There was no room for a “misunderstanding.” Both are Chinese and literally saw eye-to-eye. The later “what I meant …” correction was no correction. It was damage control.

Interestingly, Chairman Pang was the lone Chinese voice that warned against introducing new brands to a China that already is knee-deep in brands. Ever the boss of a car dealer, he warned that new brands require huge investments (also) from dealers, that customers treat unknown brands with suspicion and reservation, and that his dealerships don’t have the room to show all these new brands. Those were not the words of someone who is about to introduce another unknown brand to China. Saab has no brand equity in China.

When word spread that Youngman had (finally) sent money to Saab, it was quickly noted that nobody had said when, how much and for what. On Wednesday, Youngman had denied any comment. Conference participants were divided in their comments. Some called it downright “crazy” to send money to Saab under the circumstances. Some noted that paying a little money, even if it is paid for not completely clear intellectual property, establishes an interesting legal position that could take many years to challenge, especially in a Chinese court. Intellectual property cases already tend to be lengthy. By the time it is sorted out who bought what, who cheated whom, and who misunderstood  when, that PhoeniX  platform probably will be ready for cremation.

As for the NDRC decision, there was no one at the conference that would not have questioned the sanity of a person that hopes for an impending decision. People who have seen the NDRC in (in-)action suggest immediate medical care when someone thinks that the NDRC will approve the Saab deal within days, or even months. At a conference that was very serious, predictions of  quick NDRC action always was good for laughs. It’s the end of October 14 in China, for when a decision of the NDRC was expected and predicted. There was none.

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China On A Deadly Brand Binge Thu, 13 Oct 2011 18:53:44 +0000

If your dearest wish is that the Chinese car industry will implode, then you should pray that the Chinese remain on strategy. For whatever inconceivable reason, the Chinese car industry has embarked on a plan, which – if properly executed – will mean its assured destruction.

Government planners tell Chinese car manufacturers: “Create successful brands.”  Manufacturers reply as a chorus: “Yes, we will create as many brands as possible.”  Every second word at the Chengdu conference appeared to be “brand.”  If Chinese carmakers will do what they say – and they appear to be utterly committed – then China will soon wallow in a sea of car brands nobody has ever heard of, and nobody will ever be able to remember. Sometimes, it feels as if it is the long-term goal to give each and every of the 1.3 billion Chinese his or her individual car brand.

It’s not that there is a shortage of brands already. Nobody has an exact number, but the guesses are over 100. Soon, that number could easily double. BAIC alone announced today that it will add 9 new brands on short notice. Others have similar plans.

At the same time, speakers at the conference named many reasons why it is less than prudent to create many brands.

  • “Our brands have low name recognition.” But nobody warns that it costs untold sums of advertising money to create this recognition.
  • “We compete against brands that sometimes are over 100 years old.” But nobody warns that a new brand can take decades to be successful – if it doesn’t succumb to crib death.
  • “The multinationals invest a lot of money into advertising.” But nobody warns that already small budgets will get increasingly smaller when spread over many brands.
  • “Customers expect to pay 20 percent less for homegrown brands.” But nobody says that it is more lucrative to stay with the brands we know.
  • “Consolidation is a given.” But nobody says that the easiest way to consolidate is to trim down brands.

While large car companies the world over prune their brand portfolios, Chinese carmakers  are turning from car factories into brand factories. Joint ventures that have successful and well-known brands are urged to create new unknown brands. The knowledge and grasp of branding appears to be rudimentary. Colleagues in the business say that often, “branding” in China begins and ends with developing a logo.

Developing a new cars brand is risky, costs untold amounts of time and money. China appears to be dead-set to embark on this treacherous, costly and long journey with a highly doubtful return. In the bad old days, GM tried to leverage the equity remaining in existing brands by sticking their badges on the same body.  Even the smallest carmaker in China appears to be bent on being a miniature GM. Except that now unknown badges are stuck on the same body.

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Chengdu Global Automotive Media Summit: Better Luck Next Time Thu, 13 Oct 2011 16:19:44 +0000

The third day of the Chengdu get-together morphed into what was called a “Global Automotive Media Summit.” The idea was to prep the Chinese car manufacturers for their global push as far as the global media are concerned. For that, the services of TTAC were enlisted.  The manufacturers need any help they can get when it comes to handling the media. From BAIC to SAIC, from Chery to Geely, from state-owned Dongfeng all the way to wannabe manufacturer Pangda, they all were there and delivered their speeches. The speeches could be summed-up in two words, looped like techno-rock:

“Global. Global. Global. Global. Brands. Brands. Brands. Brands. Global Brands.”

Paul Ingrassia, deputy chief of Reuters and winner of the Pulitzer Prize for his coverage of the management turmoil at General Motors, was there and warned about too much haste. His warnings largely fell on deaf ears. Then it was time for a round-table that was supposed to teach the manufacturers what the international media expects from them and what it can do for them if handled right. It was a good group.

All the way from Sao Paulo came Micheli Rueda, the editor of the business paper Brasil Economico. From London came Jim Holder, editor of the venerable AutoCar. The “Chinese, writing for a foreign publication” side was well represented by Yang Jian, Editor in Chief of  Automotive News China. The Made-in-China foreign media had its ambassador in Zheng Wu, founder and CEO of the Chinese edition of Germany’s Auto Motor und Sport – honestly, I heretofore had no idea that something like this existed. Just like China is full with car manufacturers, there is no shortage of buff-books covering every conceivable angle. Yours truly was the moderator.

In a way, the round table showed everything that is wrong with how Chinese manufacturers handle the media in general and the international media in particular. We discussed how the big ones in Japan, Europe and the U.S. do it, we talked about what ideas the Chinese can appropriate for themselves. However, the first two rows of chairs, reserved for the captains of the Chinese auto industry, were mostly abandoned. After making their announcements, the execs had quietly left the room. No questions were fielded.

My remark “this round-table should be especially interesting for China’s auto manufacturers, but I see they mostly went home” caused a minor scandal in a room packed with Chinese auto journalists.

Make a mostly substance-free statement, and hide before anyone raises a question – that’s usually the way it goes in China, and the Media Summit did not break that mold.

Paul Ingrassia was right. Go slow, and do your homework first.

(Excerpts, in Chinese, are here.)

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Honda To Enter China With EV Wed, 12 Oct 2011 18:58:35 +0000

While U.S. Senators are wringing their hands and pounding their chests about EV know-how allegedly escaping to China, makers from other countries are doing business. The most recent EV entry is Honda. Honda will build an EV in China and sell it in China in 2012 “in limited quantities,” its R&D chief Toshihiro Mibe told TTAC in Chengdu. The electric vehicle will undergo tests this year. When ready, the EV will be launched under the Honda brand. When asked, Honda spokesperson Natsuna Asanuma was convinced that the Honda EV will qualify for Chinese subsidies.

Mibe dismissed know-how issues: “An EV is much simpler than a regular car. The only difference is the battery and the electric motor.”

Although the model was not named, it most likely is the electric Fit that has been shown by Honda.

The announcement follows an announcement by Nissan that it will export its Leaf to China with an eye on future local production if warranted by initial sales.

This flies in the face of allegations that China will insist on “Chinese” EVs when they dole out their (yet to be announced) subsidies. Senator Stabenow had her information from the New York Times. Multiple sources told TTAC that this story was false. We deserve better fact checking, if only by our elected officials.

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Our Daily Saab: Possibly Last Supper Tue, 11 Oct 2011 14:48:32 +0000

The Chengdu meeting might ruin the appetite of the Saab faithful. Saab wasn’t a topic during the proceedings, although Volvo was mentioned a lot. On the sidelines of the conference however, death sentences to Saab where handed out by the truckload.

Jim Holder, Editor of the U.K. magazine AutoCar is at the meeting. He scooped me by learning from a highly reliable source:

“A last-minute rescue deal to save Saab is virtually certain to be blocked by the Chinese government, meaning the company is almost certain to be declared bankrupt – possibly as soon as later today.

Autocar has learned that the Chinese government is unlikely to ratify any investment or takeover of Saab as the sale does not include the acquisition of any new intellectual property rights. Former Saab owner GM already has a deal with its Chinese partner firm SAIC for the Epsilon platform used by Saab.”

Holder didn’t name the source and did not even say that he heard it in Chengdu. But that’s where he is, and the conference is teeming with officials of various Chinese ministries and the NDRC. We doubted in May that “GM will alienate SAIC in order to save Saab.”

Reuters has its ace China correspondent Fang Yang at the conference, and she heard today from BAIC Chairman Xu Heyi that his company has no interest in having any part in any Saab rescue.

Meanwhile, The Guardian reports that “the administrator in charge of Saab‘s restructuring under court protection could pull the plug on the process as early as Tuesday, paving the way for declaring the carmaker bankrupt.”


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China: Big But Weak, Attack On The West Postponed For 5 Years Tue, 11 Oct 2011 13:55:48 +0000 The Global Automotive Forum is an annual confab of Chinese politicos, functionaries, industry leaders and wonks of the world. This year, it is in Chengdu, and the motto is “From volume leader to innovation leader.” The subhead could very well be: “What now?”

Speaker after speaker bemoans the fact that China is winning by sheer numbers, but is falling behind in the innovation race. The fractionalized Chinese car industry simply does not have the wherewithal to keep up with the big multinationals. No longer are the multinationals afraid of being frozen out. The power shift towards  the multinationals is so pronounced that Jay Kunkel, China chief of German systems supplier Continental, can smugly remark: “Strategies are one thing, but the secret is in the doing.”

Continental had nearly been taken down after a not so friendly takeover by Schaeffler Group in 2008 – definitely the wrong time for such a maneuver. Now, Continental’s Chinese CEO can dispense haughty advice, and the audience applauds.

Speaker after speaker says that the ICE will likely be around for a while, and that incremental improvements in efficiency, weight, rolling resistance etc. are beyond the grasp of Chinese companies. Functionaries of Chinese ministries openly remark that the Chinese car industry is “big but weak” – no lightning strikes from the sky, and nobody drags them off to a slave labor camp. Instead, the audience applauds.

The Chinese car industry is being out-researched, out-developed, and out-engineered by the big industry behemoths. Most of all, China is being outspent. The big companies usually spend 5 percent of sales for R&D, we hear today. Chinese makers spend maybe 2 percent of their much smaller sales, and that “mostly on application research and rarely on future technologies, “ as one panelist remarks. (Applause.)

Even the wages aren’t as low as they used to be. One panelist comments that an engineer hour in Shanghai now costs the same as in Rüsselsheim. Another says that German carmakers don’t have to go all the way to China for low wages. They get the same in Slovakia, 8 truck hours from Frankfurt. None of the Chinese registers a veto. Someone adds: “Yes, and most of those Chinese engineers are under 25.” The Chinese industrial giant looks a bit pale around the nose today in Chengdu.

As far as the feared Chinese exports go, they simply aren’t happening. Last year, China exported less than 3 percent of its car production. This year will be about the same. China imports more cars than it exports. The big joint ventures say they don’t need exports, China is a big enough market. Smaller makers like Chery must export to round out the small domestic volume. They focus on markets like South America and Russia, while admitting that their sales and service networks there are weak. Lu Jian Hui, Deputy General Manager of Chery says any push into Europe or America has to wait “until after the end of the 12th Five Year Plan.” That ends in 2015.

One thing is utterly perplexing: Functionary after functionary demands more local brands, both from the independents and from the joint ventures. China is awash in car brands. There are small carmakers that have more brands than GM in the bad old days. We are in a land where the exact number of car makers remains a mystery (the guesstimate used to be somewhere above 100, today, it grows to 150 without anybody complaining). We are at a meeting where frequent mentions of “consolidation” elicit round after round of applause. Nevertheless, they demand more brands. Privately, Western wonks say that establishing a car brand takes many decades and untold sums of money and patience. They snicker that Western makers shed brands instead of adding them. Publicly, nobody questions the sanity of the avalanche of Chinese brands. Except for one speaker, who coyly shows a slide that has Saturn on it, as an example that new brands don’t have assured success. Too subtle. Applause from the audience.

PS: On Thursday, yours truly will host a roundtable with members of the Chinese and foreign press. We’ll discuss how the foreign media sees the Chinese auto industry – if it sees it at all.

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