Chinese Firms Knocking on Detroit Doors: Auto Boom For Everyone
For years, American companies have relied on manufacturing practices that involve deeply-entrenched operations in China and other emerging economies. While the great exodus of manual labor was held at the detriment of American jobs, it opened the doors to a way of life that the United States has now become entirely accustomed to.
A few decades ago, this was not the case, especially in the auto industry. Cars were proudly made in America, one of the few longer-lasting traditions that the country has kept within its shores. Thus, when a spike of Japanese imports arrived stateside in the early 1980s, the cheaper, more fuel-efficient vehicles were shunned as invasive. Now, in a twist to the standard import-from-China model, Chinese car companies are setting up shop right in the domestic automobile industry’s heart of Detroit — albeit quietly.
Although the world’s most populous country has manufacturing down to an art, innovative and cutting-edge automotive design is not quite its strength. Chinese domestic attempts at new cars tend to be underwhelming, and often end up being a badge-engineered model from a foreign company. Realizing this, the country’s car makers are coming to America to find skills and knowledge to bring back with them.
A number of Chinese firms are investing in American firms, and are seeking new vehicle technologies that they will be able to apply to their vehicles back in Asia. While initial reactions might be expressions of anger or distrust, the companies are hiring engineers and industry professionals who lost their jobs due to American downsizing, or exporting of work. Essentially, China is doing the exact opposite to America as what we have been doing to them; the twist is while we have a shortage of affordable labor stateside, China has a deficit of high-end professionals capable of innovating at a globally competitive level.
It’s also no secret that Detroit has been suffering heavily since the auto industry transplanted to less costly locations, such as southern states, Mexico, and other regions where labor is more affordable. It seems that here, the Chinese are helping to rejuvenate the city: over 50,000 Chinese who work at General Motors (NYSE:GM) and Ford (NYSE:F) live within the metropolitan area, and as Chinese firms continue to root themselves in the area, more citizens are being sent from the headquarters in Asia to supplement the talent found on American soil.
Changan Automotive, as well as Shanghai Automotive Industries, have both set up offices in Detroit, although very discretely. However, in efforts not to cause ripples, an under current of Chinese presence has started to swell, enough that Washington took notice last year. President Obama filed a complaint with the World Trade Organization, stating China’s government was unfairly subsidizing the production of some parts shipped to America. This is especially a big deal for automotive batteries, which the government heavily subsidizes here in the U.S.
The Detroit Chinese Business Association now has over 100 businesses as members, many of whom are in the automotive industries, trying to mesh themselves in to the intricate supplier network that has been well-established for years. GM and Ford offer large opportunities for Chinese firms, which are salivating for the chance to land a heavyweight contract with the American companies.
However, the influx of Chinese presence might have an overall beneficial effect on the industry as a whole. GM and Ford are performing strongly in the domestic market, and Asia — notably China — is showing great signs of strength for the automakers, which are scrambling to ramp up Asian production to meet the demand.
Additionally, American cars do well abroad (in China, especially) because China lacks the know-how to create a comparably competitive product. With more, higher-pressure global competition, car manufacturers worldwide will need to remain innovative and on top of things, and not fall into periods of creative stagnancy.
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