In early February, a top-level delegation from General Motor's Detroit office visited the Liuzhou Wuling Motor Co. in China's remote Guangxi province. Also among the group, on his third visit, was Philip Murtaugh, chairman and CEO of GM's China Group. A car show? Not this tour. The execs were hashing out details for a proposed partnership between GM and Wuling.
Pairing with a foreign partner isn't a new strategy for a Chinese company, but Wuling is taking this joint partnership to a new level. Within a few months, it hopes to list shares on China's B-share market. GM will buy a 34% stake in the Chinese auto maker by purchasing 90% of those shares.
As China struggles to reform its stagnant state-owned sector, Wuling, formerly state-owned, is using foreign investment from a world-class company to try to transform itself into a global competitor. "I originally thought the auto industry was a national industry, but after China enters WTO, all industries will become global industries," explains Liuzhou Wuling general manager and director Shen Yang. This combo may become the prototype for other industries as well.
SIDE BY SIDE. The GM connection is already apparent. Red lines painted on the floor mark exactly where various car parts and boxes of tools should be placed on the manufacturing line. Overhead, gold-colored minivans roll along, halting automatically at various stations so blue-coated workers can add parts. Both are factory-floor mainstays of GM's plant in Shanghai, which Wuling execs recently visited. Now, dozens of GM experts are working alongside Wuling staff to make production more efficient. "We should take measures before China enters WTO, especially in technology and management," says Shen. The GM investment "is the most important measure," he adds.
Coming to Liuzhou must have been a bit of a shock for the Detroit executives. Like most Chinese carmaking facilities, Wuling's 2.1-square-kilometer campus includes not just a factory but dormitories for workers (now empty), a coal plant, and the usual brown-tile four-story building housing the executive offices. A few spindly palm trees decorate the front lawn, but there's not much else to see.
At least some of the empty buildings may be put to use soon, however. Liuzhou Wuling plans to build a another production line after the GM agreement is sealed, says Shen. For now, Wuling will stick to its area of expertise in minivans. Shen is mum on whether it will work with GM to turn out a new minicar to sell to China's masses.
LOOKING GOOD. The overwhelming majority of Wuling's sales are in China, but combining with GM could change that. Shen is eyeing GM's worldwide sales system. GM dealers are preparing to visit Liuzhou to check out the minis, he says. Meanwhile, Wuling will use GM's expertise to keep turning out its hot Chinese minivan market, which sold 110,000 units in 2000. The company is forecasting sales of at least 120,000 in 2001.
Things are looking good so far: In the Jan.-Feb. periord, Wuling's sales rose 46.5%, compared to the same period in 2000, and March sales orders for 15,000 are a 30% increase over March of last year. Wuling's minis sell for $2,400 to $12,000.
Liuzhou is a gritty place. Besides Wuling, which employs 6,500 people, the town's main industries are a shipbuilding yard and automotive industry suppliers. Motorcycles are fast replacing bicycles as the favorite form of transportation for locals, and, of course, plenty of six-seater Wuling minivans are plying the streets. On the highway, transport trucks carrying 10 or more minivans to market roll past regularly. In the future, maybe those trucks will be carrying minicars, too. By Alysha Webb in Liuzhou