The Start of Shanghai GM
Author's Note: Although this is an "I was there..." article, I would invite any other GM employees who were part of the early startup of Shanghai GM to contribute their own reminiscences and perspectives.
I came to China in early 1994, during the first weeks of what was called "The Shanghai Project." At the time, a few early GM China execs, Rick Swando, Steve Schnell and Ron Gilchrist had been discussing the possibility of a production joint venture with Shanghai Automotive Industry Corporation (SAIC) since late 1993. The sum total of their efforts was a friendly relations with SAIC top execs, a rolodex of business cards and a powerpoint presentation of basic JV assumptions.
SAIC is unusual in the Chinese auto industry in that it is a state owned enterprise of the Shanghai city government. Most of the other large indigenous auto companies are owned by China's central government.
GM was, at the time, competing with Ford and Toyota to get the agreement from SAIC to become their second OEM partner in China. SAIC had an existing and highly successful JV with Volkswagen ("Shanghai VW") since the mid 1980s, but SAIC had concluded that their partnership with VW was not a strong basis to grow their future business in China, nor did it offer SAIC the opportunity to develop in line with China's Automotive Policy and vision for the Chinese Auto Industry. The Chinese government required the Chinese auto companies to develop their own R&D / product development capabilities, to achieve product capacity of at least 100,000 units per year, high levels of component localization and to develop several other basic infrastructure elements. It was understood that VW had indicated to SAIC that, "Thank you very much, we like the current structure of our joint venture with you, but are not interested in taking the next steps to develop an integrated auto company in China." Shanghai VW was producing highly localized, but outdated (by at least 2 product generations) "Santana" sedans.
Toyota was in the hunt, but was slow and reluctant to fully realize SAIC's vision of a Chinese auto company. They were specifically unwilling to partner in the development of a local R &D center and were also reluctant to share their latest product technology. This effectively eliminated Toyota from the competition for SAIC's new JV.
Ford was a much more credible threat, and perhaps was in the lead in the competition in the eyes of many SAIC execs. Ford was offering all the requirements: a fully modern sedan and minivan off the same architecture (Taurus & Windstar), local R&D center JV, local components development and the possibility of exporting vehicles from China. Ford was headquartered in Beijing and had cultivated relationships with China central government officials in the key automotive and foreign trade bureaucracies. Their relationships in Shanghai were not as strong.
At the time, it was not clear who ultimately made the decision about the new partner for SAIC. The city of Shanghai owned SAIC and had a strong interest in finding the right partner. Further, Shanghai city government was very powerful in national politics, as many of the top Chinese central government officials, including the President Jiang Zemin, came from Shanghai or surrounding provinces. But, the central governments auto policy was determined by bureaucracies in Beijing. Ultimately, SAIC's partner selection needed Beijing's approval. Ford assumed that gaining favor in Beijing would give them an advantage by ensuring easy bureaucratic approval. GM, which was weak in its relationships with Beijing bureaucrats at the time, assumed that Shanghai City government would decide the partner selection and be able to get their selection approved in Beijing due to Shanghai's political power.
(to be continued)