China In Detroit, Part 2: A Conversation With David Cole

The Chairman Emeritus Of The Center For Automotive Research On China & The Global Auto Industry

Detroit

In Part 2 of our two-part series on the Chinese presence in the Detroit-area global auto industry, Jing Daily interviewed David E. Cole, chairman of AutoHarvest and chairman emeritus of the Center for Automotive Research. In our conversation, Cole discusses China’s expanding presence in the Detroit-area auto industry, and the future of global Chinese auto production.

How would you describe the Chinese presence in the U.S. auto industry?

Chinese leadership at the highest policy level is focused in obtaining industrial know-how, experience and capabilities that are available in other parts of the world and bringing this to Chinese organizations. That’s why you’re seeing investment here in Michigan.

In so many respects they’re here to learn. It’s clear that they’re interested in becoming knowledgeable about all aspects of the automobile industry, whether it’s the technology side, automotive development, design, sales and marketing, or understanding how the dealer system works. It’s all part of what they’re learning.

But it’s not a big splash, where all of a sudden China is here making a lot of noise. Instead, it’s a steady flow of connectivity.

One of my good friends is June Ni, a professor of engineering in the mechanical engineering department at the University of Michigan. June has a 50/50 appointment between the University of Michigan and Jiaotong University in Shanghai. There are around 400 Chinese students in engineering and technical programs at the University of Michigan through a cooperative arrangement.

Dr. David E. Cole. (AutoHarvest)

Dr. David E. Cole. (AutoHarvest)

Why Detroit and southeastern Michigan?

Strategically, companies often find that if they’re going to be in auto, they need a presence here. There are over 350 suppliers that have major activities here, and in terms of R&D directly applied to auto, about 70 percent of what’s done in the U.S. is done in Michigan.

This is not unique to the Chinese. Most of the auto companies of the world have some presence in southeastern Michigan. There are three major manufacturers, in addition to the Detroit Three, with significant engineering facilities here: Hyundai, Toyota, and Nissan. Companies such as Tata also have engineering facilities here.

In our conversation with Jerry Xu of the Detroit Chinese Business Association, he mentioned the Chinese acquisition of a company called Nexteer. Tell us more about that.

Nexteer is a steering-system company in Saginaw, Michigan. It was viewed as an inexpensive asset with world-class knowledge and a book of business. But I’ll tell you, there was no hue and cry about the Chinese taking over because their acquisition was going to keep those jobs in the community. The general view of the people in the area was that if they didn’t have the Chinese acquiring this company, they could have all lost their jobs and the assets of the community could have disappeared. They were thankful for the Chinese coming in and in fact keeping that company going.

Do you see Chinese companies moving into the luxury automotive sector as a long-term strategy?

I don’t think there’s any question about that.  What I’d ask is whether it’s going to be successful outside China. It will probably be successful within China—although one of the challenges now is that Chinese consumers, as I understand it, are not as excited about local Chinese products as they are about products from international brands. At the luxury end of the market, you see quality and technology at a much higher level than in the large-volume car market. The bar is much higher.

How would you describe the Michigan state government’s relationship with China? How is it different from the approach you’ve been seeing from other American sectors?

One of the problems is that as Americans our approach is too often, “Let’s have lunch and then sign contracts.” In most societies the foundation is a relationship. Americans tend to be more impatient in this respect. What I’ve seen with Governor [Rick] Snyder is a recognition that it is critically important for the state of Michigan to build a solid long-term relationship with China.  He’s traveled to China several times and some of the people on his staff have been there a lot more.  It’s part of his strategic agenda for the state of Michigan to build a comprehensive longterm relationship with China.

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Industry Sectors, Transportation