Lately, China has been on something of a stealth mission in Detroit. And the timing is no coincidence. You see, there’s an ancient Chinese proverb that says, “A crisis is an opportunity for riding the dangerous wind.” And Chinese investors are taking this idea to heart.
Just look at Shanghai Auto (SAIC U.S.A.). Though it employs only 20 Detroit engineers, SAIC caught the collective car industry off-guard when it opened offices in Birmingham, a Detroit suburb.
For SAIC, the biggest selling point is a large, experienced pool of workers who were laid off during the past few years. The company’s goal is to sell Chinese-made cars on a mass scale in the United States.
SAIC isn’t alone on its mission, either…
Chang’an U.S. Research and Development Center Inc. set up a research and development shop in Michigan in 2011.
Wanxiang Group Corp. bought battery maker A123 Systems Inc.
Another 50,000 Chinese professionals work at GM (GM) and Ford (F), and live in the metropolitan area. The Ford Chinese Association, with its 650 white-collar workers, has become one of Ford’s largest employee groups.
And the Detroit Chinese Business Association’s flourishing membership includes 100 local, Chinese-owned businesses – mostly auto-related.
Who can blame the Chinese for moving in at this point? There are certainly some “dangerous winds” in Detroit these days.
I prefer, however, to put my faith (and investment dollars) into a couple of tried-and-true American staples.
The Chinese may be making moves in Detroit. But that doesn’t mean that American automakers are stuck in idle.
On the contrary… GM and Ford posted their highest sales levels since June 2008 and June 2006, respectively. And best of all, they plan to do some invading of their own… in China.
Buy Red, White and Blue
That’s right. Just as the Chinese are moving in on Detroit, U.S. automakers are doing exactly the opposite. And it’s no surprise why…
Ford estimates that by 2020, one billion Chinese will be able to afford to buy cars. And the company has positioned itself perfectly. Today, Ford is the fastest-growing international car company in China, with a 12.6% hike in the first five months of 2013. The company is shooting for additional market share growth of 6% by 2015 and 7.5% by 2020.
Two new SUVs – the Kuga and Explorer – are driving Ford’s rapid growth. And the company plans to invest $4.9 billion through 2015 to double production capacity to approximately 1.6 million vehicles.
Ultimately, Ford plans to one day generate 40% of its global sales from China.
In comparison, GM saw 11% year-over-year growth, and it remains the biggest foreign auto company in terms of total vehicle sales. It sold around 1.3 million in the first five months of 2013, and the company expects to sell as many as three million vehicles before the year’s end.
GM is also planning an $11-billion investment to build four new plants, including a $1.3-billion Cadillac plant that just broke ground in China. In the meantime, the company will launch at least 10 new or revamped models every year through 2016, aiming for a production capacity of five million cars.
My take? I’d say investors in Ford and GM will fare much better than their Chinese counterparts chasing profits in downtown Detroit.
Ahead of the tape,
Karen Canella
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Original Article: A Tale of Two Markets