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Chinese Automakers Quietly Build a Detroit Presence

May 13, 2013 by Leave a Comment

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

Chinese-owned companies are investing in American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring experienced engineers and designers in an effort 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 eventually 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, Mich. “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 and Honda in the 1980s, when the sudden influx of foreign cars competing head-on with cars from General Motors, Ford and Chrysler was perceived as a threat to American jobs.

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

But China’s growth in the American 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 America. And the country’s inroads into American-made batteries and electric vehicles have drawn scrutiny because that sector of the industry has been heavily subsidized by the United States government.

The American industry’s overall resurgence has drawn a growing Chinese population to Detroit, with Chinese-owned suppliers bringing executives from their country and American automakers adding new talent. About 50,000 Chinese, many of them engineers and other professionals who work at General Motors and the Ford Motor Company, live in the metropolitan area.

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, predominantly from mainland China, has become one of the largest employee groups at the company. Its president, Raymond Xu, recalled that in 1999, when he came to Detroit to attend college, there were very few Chinese 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 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 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 American facility. “They know how to make vehicles, but they don’t know how to develop them.”One of his employees is Alan Wall, 54, a former contract engineer at Chrysler who lost his job during the recession.

“It was an opportunity,” he said. “And those tend to come from a company that is trying to expand.”

Last year, China exported about $13 billion in automotive goods to the United States — 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 now get many of their most common parts from low-wage nations like 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 G.M. and the other carmakers.

“We have been exporting our parts to North America for 15 years for the aftermarket,” said Dongbin Chen, a Brilliance executive, referring to retail sales of replacement parts. “Now our biggest opportunity is with G.M. and the other big companies.”

Brilliance scored a coup last year by supplying lightweight engine mounts for the new Cadillac ATS sedan made by G.M. in Lansing, Mich., which has whetted the company’s appetite for more.

At a United States-China conference held here in November, 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 America.

“We have the ability and the capacity to supply these kinds of parts,” Mr. Chen said. “And I think right now, it is very important for us to be here.”

Article source: http://www.nytimes.com/2013/05/13/business/global/chinese-automakers-quietly-build-a-detroit-presence.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Economix Blog: The Quiet Driver of Economic Growth: Exports

January 29, 2012 by Leave a Comment

The estimates of the nation’s economic performance last year, released Friday, highlight a striking trend: Exports have never been more important.

Foreign buyers purchased more than $2 trillion in goods and services, the first time exports have topped that threshold. And those exports accounted for almost 14 percent of gross domestic product, the largest share since at least 1929.

Source: Bureau of Economic Analysis

We usually talk about exports alongside its opposite number, imports, and since the United States buys much more than it sells – our “trade deficit” — the general impression is that foreign trade is a drag on the economy. But that tends to obscure the importance of exports, which have accounted for about 10 percent of G.D.P. over the last two decades and, since the recession, considerably more.

The growth has come from all areas, but the real strength has come from what might be called the old economy: petroleum, metals, chemicals and farm goods.

(On the short list of goods the United States is selling in smaller quantities than in 2000: tobacco, shoes and apparel, and automobile engines.)

Much of the rise in exports is a consequence of domestic problems. The value of the dollar has declined, so that foreigners save money when they buy American. Businesses, struggling to find customers here, are focusing on foreign sales. And a boom in commodity prices, which has raised the price of life for most Americans, has produced a windfall for those who trade in commodities.

This is a good thing on the whole. The ability of American companies to make money in foreign markets is helping to offset the pain of those domestic problems.

Indeed, the Obama administration has hailed the growth as a key to economic recovery, and in 2010 declared a goal of doubling exports to $3.1 trillion by 2015.

That goal may prove hard to reach, as Annie Lowrey explained in a recent article. But the trend itself is real enough, and likely to continue.

Article source: http://feeds.nytimes.com/click.phdo?i=a9bec3baa6521e3726344641e4618121

Filed Under: Economy News Tagged With: , ,

Senate Nears Approval of Measure to Punish China Over Currency Manipulation

October 7, 2011 by Leave a Comment

After eight years, that campaign is on the verge of a breakthrough, as the Senate appeared ready Thursday to approve a get-tough approach that had stalled numerous times before: a bill to punish China with high tariffs on some exports if it fails to adopt a market-driven exchange rate.

Economists say China’s artificially cheap currency has cost the United States jobs and billions in lost trade. But opponents of tariffs, including major manufacturers doing business in China, warn that penalizing China could start a trade war that would hurt American businesses even more.

“We’re already in a trade war,” Senator Charles E. Schumer, the New York Democrat who has led the push for tariffs, said in an interview. “We can’t afford to just do nothing. This is a message to China that the jig is finally up.”

The American jobless problem have combined to give the tariff proposal newfound momentum, as the Senate spent much of the afternoon Thursday debating it.

Supporters, casting the measure as a way to spur job growth, were confident the Senate would approve it. Even the measure’s fiercest opponents were grudgingly predicting passage in the Senate, and probably the House.

But 11-hour resistance by leading Republicans has clouded the outcome in the House, where the speaker, John A. Boehner, this week called the tariff plan “dangerous,” and it is unclear if the issue will even come up for a House vote.

China itself voiced strong objections this week and charged that meddling by the United States in Chinese currency violated world trade protocols. The Chinese Embassy has retained one of Washington’s most powerful lobbying shops, Patton Boggs, to represent its interests for $420,000 a year.

Lobbyists for General Motors, Caterpillar, steel producers, textile manufacturers, toy makers, poultry farmers and other businesses have also weighed in, supporting or opposing the tariffs depending on their own business relations with China.

Generally, large manufacturers like Caterpillar that operate in China have opposed it, warning of a backlash. Smaller businesses, like a tube maker in Ohio or a ceramics maker in upstate New York, have supported tariffs because they say China has artificially lowered its prices and gained an unfair edge.

While the Chinese renminbi has risen 6 percent against the dollar since China loosened currency controls last year, economists say it is still vastly undervalued. Meanwhile, China’s trade surplus with the United States stands at $273 billion — more than triple the gap a decade earlier.

In Senate testimony this week, the Federal Reserve chairman, Ben S. Bernanke, went so far as to link China’s undervaluing of its currency to the slow economic recovery worldwide.

“The Chinese currency policy is blocking that process,” Mr. Bernanke testified. “And so it is to some extent hurting the recovery process.”

The Obama administration, however, has been noncommittal about the tariff proposal.

At a news conference on Thursday, President Obama would not say whether he would veto the bill it if it passed, but he raised concerns.

On the one hand, he said, “China has been very aggressive in gaming the trading system to its advantage,” and “it is indisputable that they intervene heavily in the currency markets.”

But he cautioned that he did not want to see the World Trade Organization strike down any steps the United States might take. “Then suddenly U.S. companies are subject to a whole bunch of sanctions,” Mr. Obama said.

Both supporters and opponents of the tariffs see the outcome as hugely significant financially and politically.

Article source: http://www.nytimes.com/2011/10/07/business/senate-nears-approval-of-measure-to-punish-china-over-currency-manipulation.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Economix Blog: ‘Made in China,’ but Still Profiting Americans

August 16, 2011 by Leave a Comment

4:40 p.m. | Updated to correct the name of the organization that released the study.

DESCRIPTIONMichael Mandiberg (Creative Commons)

Over the years I’ve heard many Americans fret about buying goods that are “Made in China,” since they want their cash to go to American companies instead of Chinese ones. A new study, however, finds that a majority of the price consumers pay for goods labeled “Made in China” actually does go to American businesses, not Chinese ones.

The study, from the Federal Reserve Bank of San Fransisco, estimates that of every dollar consumers spend on a product labeled “Made in China,” about 45 cents goes to China for the cost of the original import.

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

On the other hand, about 55 cents of that dollar pays for services produced in the United States, such as the transportation for the product, rent for the store where the product is sold, the salaries of the salespeople at the store, the cost of marketing the product, the profits for shareholders of the retailer selling the product and so on.

What’s more, the fraction of a retail product’s price going to American services is higher for Chinese-made products than for products made in other foreign countries. For retail prices on overall imported goods, only 36 percent — or 36 cents on the dollar, instead of 55 cents on the dollar for made-in-China goods only — goes to American companies and their workers.

That difference is largely caused by the types of products American import from China versus other countries.

“The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services,” write Galina Hale and Bart Hobijn, the authors of the study.

Bear in mind that there are other ways that American consumer spending gets channeled to China, among other countries. That is, many American-made products or services use imported goods as inputs. These types of imports, which are used as parts and not sold directly to consumers, are called “intermediate goods,” as opposed to “final goods.”

Given this, the San Francisco Fed’s study also looked into what share of total personal consumption expenditures in the United States goes to imported final goods (again, consumer products) and intermediate goods (parts).

DESCRIPTION

The authors found that about 13.9 percent of all United States consumer spending goes to imports, including both final and intermediate goods. Chinese imports alone — including both final goods and intermediate goods from China — accounts for just 1.9 percent of total consumer spending.

This post has been revised to reflect the following correction:

Correction: August 15, 2011

An earlier version of this post incorrectly identified the Federal Reserve Bank that issued the paper. It was the Federal Reserve Bank of San Francisco, not the New York Fed.

Article source: http://feeds.nytimes.com/click.phdo?i=bcd47c86e42009b55e6cf70443c5bde9

Filed Under: Economy News Tagged With: , ,