Chinese carmakers quietly carve niche in Detroit, push into U.S. auto industry

5/27/2013
NEW YORK TIMES
The spread of Chinese business is expected to result in the sale of Chinese cars in the United States.
The spread of Chinese business is expected to result in the sale of Chinese cars in the United States.

DETROIT — Dozens of companies from China are quietly putting down roots in Detroit, part of the country’s steady push into the U.S. auto industry.

Chinese-owned companies are investing in American companies and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring veteran engineers and designers to try to soak up the talent and expertise of domestic automakers and their suppliers.

While starting with batteries and auto parts, the spread of Chinese business is expected to result in the sale of Chinese cars in the United States.

“The Chinese are well behind the Japanese when they hit our shores 30 years ago,” said David E. Cole, a founder of the Center for Automotive Research in Ann Arbor. “They lack the know-how, and they’re coming here to get it.”

As businesses sprout up with little fanfare, Chinese companies seem to be trying to avoid the type of public opposition experienced by the Japanese automakers Toyota Motor Corp. and Honda Motor Co. in the 1980s, when the sudden influx of foreign cars competing head-on with cars from General Motors Co., Ford Motor Co., and Chrysler Group LLC was perceived as a threat to American jobs.

In contrast to the Japanese, Chinese auto companies are avoiding the spotlight. Last year, the biggest carmaker in China, Shanghai Automotive Industries, opened offices in suburban Detroit without publicity, which is almost unheard of in an industry that thrives on media coverage.

But China’s growth in the U.S. auto industry is drawing notice in Washington. Last year, the Obama Administration filed a complaint with the World Trade Organization that China’s government was unfairly subsidizing the production of some parts shipped to the United States. And the country’s inroads into U.S.-made batteries and electric vehicles have drawn scrutiny because that sector of the industry has been heavily subsidized by the federal government.

The U.S. industry’s resurgence has drawn a growing Chinese population to Detroit. About 50,000 Chinese, many of them engineers and other professionals who work at GM and Ford, live in the metropolitan area.

Evidence of their new influence is sprinkled through civic activities, with community groups sponsoring youth soccer leagues, basketball tournaments, and activities. One organization runs a Chinese soup kitchen at a local homeless shelter.

Business networks are growing too. The Detroit Chinese Business Association boasts a flourishing membership and counts about 100 Chinese-owned businesses, mostly auto-related, in the region. The Ford Chinese Association, with 650 white-collar workers, has become one of the largest employee groups at the company. Its president, Raymond Xu, recalled that in 1999, when he moved to Detroit to attend college, few Chinese were in the area.

“I think people are going to get more and more comfortable with it,” Mr. Xu said.

Typical of the Chinese expansion are the nondescript offices of Changan Automotive Group in an industrial park in the suburban city of Plymouth. Changan, a major carmaker in China, set up a research center to better understand the structural chassis of a vehicle, then hired about 20 veteran Detroit engineers, some of whom had been laid off from Detroit’s auto companies, to staff the project.

“Most of the engineers are very young in China,” said Hong Su, the Changan executive heading the U.S. facility. “They know how to make vehicles, but they don’t know how to develop them.”

China exports about $13 billion in automotive goods to the United States each year — tires, wheels, and radios that are sold as replacement parts — according to AlixPartners, a consulting firm.

But many Chinese suppliers are pursuing direct business with the Detroit car companies, which get many of their most common parts from low-wage nations such as Mexico. One supplier, Brilliance Auto, an industrial giant with about 500,000 employees in the city of Shenyang in northeast China, is still an underdog in Detroit, trying to crack an intricate network of suppliers that have long relationships with GM and the other carmakers.

Brilliance scored a coup last year by supplying lightweight engine mounts for the new Cadillac ATS sedan made by GM in Lansing, which has whetted the company’s appetite for more. At a U.S.-China conference held here, Brilliance displayed a large exhibit showcasing a range of mundane parts — including seat belts, steering wheels, and shock absorbers — that it hopes to export to the United States.

In addition to Chinese firms locating in Detroit, a cottage industry of lawyers, accountants, and corporate advisers has grown up to aid them. Their numbers are small, but the impact of the Chinese on the local economy is slowly expanding.

Industry analysts are hard-pressed to put a number on the Chinese suppliers operating in the United States.

In one of the more prominent deals, the Wanxiang Group Corp. bought most of the assets of the battery maker A123 Systems Inc., which filed for bankruptcy last year despite receiving $132 million of $249 million in federal grants to build two factories in Michigan. Congressional Republicans criticized the deal, saying A123’s technology could support military applications in China. Still, the Committee on Foreign Investment in the U.S., a federal panel, approved the buyout this year.

Wanxiang, which has its U.S. headquarters near Chicago, has acquired several American auto parts and solar companies. But it attracted little attention until it took an interest in A123 Systems.

“I wasn’t surprised by the negative reaction,” said Pin Ni, head of the firm’s U.S. unit. “The reality is we grow here like a small seed into a bigger tree, and we cannot avoid this type of response.”

He said that Wanxiang employed several thousand American workers and kept local management in place at companies it had bought. “We act, talk, and walk like an American company,” Mr. Ni said. “In the end, it’s all about making money.”

Other Chinese companies are averse to publicity. Shanghai Auto is the largest carmaker in China and has major joint ventures there with GM and the German automaker Volkswagen AG. But when the company opened its Detroit-area offices last year, even GM was surprised.

“Since we do not do business with SAIC in the U.S., there is no connection between GM and the SAIC office in the U.S.,” Dayna Hart, a GM spokesman, said.

The arms-length reaction underscores the sensitivity surrounding China’s presence in the U.S. industry. Only about 4 percent of Chinese-made light vehicles are exported now, mostly to countries in Africa and the Middle East. But the Detroit automakers are bracing for the day when competitive Chinese cars hit the American market.

“The Chinese have a lot of money and they are moving fast,” said Mr. Cole of the Center for Automotive Research. “We’re going to see a lot more of them here.”