CARTOWN
by PETER HESSLER
An upstart automaker targets the American market.
Issue of 2005-09-26
Posted 2005-09-19

On the way to Wuhu, I drove through Confucius’ home town. I also passed the Stone Warriors of Nanpi, the Iron Lion of Shijia, and the Alfalfa Land of Jinniu. The village of Jinxiang had posted a big sign, in English, above the highway: “The Best Garlic Is from Jinxiang in All of China.” Wuhu is a new car town. A local company had recently declared its intention to become the first Chinese automaker to export to the United States, and the American partners were scheduled to arrive on Sunday. On Friday, I had rented a Chinese-made Volkswagen Jetta and headed south to meet them. Two days, eight hundred miles: a road trip from Beijing to Wuhu.

The highways were excellent—four lanes, groomed medians. Some sections were so new that they still appeared on the map as broken lines. The Chinese expressway network has doubled in length in the past four years, and in January the ministry of communications held a press conference to announce plans to add another thirty thousand miles. When asked about the purpose of the new roads, Zhang Chunxian, the minister of communications, mentioned Condoleezza Rice’s visit to the People’s Republic in July, 2004. According to Zhang, Rice told a Chinese official that she had fond memories from her childhood of vacations spent travelling in the family car. “She said those trips helped her love the United States,” Zhang explained. “By building expressways, we can boost the auto industry, but that’s only a small part of it.”

I drove past miles of shiny new billboards; they were as blank as unplugged televisions, waiting for advertisers to figure out what kind of consumers might someday pass this way. In recent years, increasing numbers of urban Chinese have purchased automobiles, but it’s still rare for them to take long trips, because tolls are high and drivers are inexperienced. The highway traffic consisted mostly of trucks, heavily loaded and braking hard on the downhills. South of Tianjin, traffic slowed and swerved; hundreds of pamphlets flapped above the road like dying birds. I pulled over and caught one. Apparently, a truck full of imported recycling materials had come unlatched. The pamphlet was a fourteen-page mortgage application for Woolwich, a financial-services company in Dartford, Kent, and it was as blank as the billboards.

I stopped again at the Confucius family cemetery. The city of Qufu had turned it into a tourist attraction, with signs posted at the highway exits, but my car was the only one in the lot. The cemetery, which sprawled through a big forest, was quiet. For more than twenty centuries, local men with the Confucius family name—Kong—had been buried here, along with their wives. A hundred thousand people were laid to rest among the cypress trees.

One tombstone dated to the late Ming dynasty and the sixty-second Kong generation. I took a few steps to the next memorial and skipped four hundred years: 2001, seventy-fourth generation. I was on my way to another tablet when I heard the sound of wailing. I followed it, picking my way around the tombs.

A group of women cried and kowtowed before a mound of fresh earth. They had arrived on a Taishan 200 tractor, which had three wheels and a two-stroke engine. The tomb offerings were simple: oranges, apples, a boiled chicken.

The men stood nearby, watching, and one of them offered me a cigarette. He told me that they were burying a woman who had been married to a member of the seventy-second generation of Kongs. The wailing continued for ten more minutes, and then stopped abruptly. Two women came over to talk; they asked me what American funerals were like, and if it was true that people in my country could have as many children as they wanted. I told them that I was of the fifth generation of Hesslers in America. A man crank-started the tractor, and they putted off into the mist. They had left the chicken but packed up the oranges.

Nearby, the stone memorial above Confucius’ tomb was still cracked from the vandalism of the Cultural Revolution. A tour guide told me that Red Guards had excavated the grave and found it empty.

In Wuhu, Malcolm Bricklin, the leader of the American contingent, told me, “We’re making history, and I’m going to film it.” Bricklin, who is sixty-six years old, has spent most of his life chasing breakthroughs in the automotive industry. In the late sixties, he introduced Subaru to American consumers. In the early seventies, he founded an automobile manufacturer in New Brunswick, Canada. He commissioned the design of a futuristic sports car with gull-wing doors, named it after himself, and promptly went bankrupt. In the eighties, he brought the Yugo across the Atlantic. He declared personal bankruptcy in the early nineties. In 2002, with a team of private investors and technical advisers, he began searching for another foreign auto company that was capable of exporting to the United States. He visited England, Serbia, Romania, Poland, and India. He stopped looking once he got to Wuhu.

By Chinese standards, Wuhu is a small city (population, seven hundred thousand), but a local company called Chery had become, as of 2004, the ninth-biggest auto manufacturer in the country. In December of that year, Chery signed a distribution agreement with Visionary Vehicles, a limited-liability company that Bricklin had registered in Delaware. Visionary Vehicles promised to arrange a dealer network in the United States, and also planned to contribute two hundred million dollars toward the design and development of five new Chery models destined for the American market. They hope to begin by importing a quarter of a million vehicles in 2007. The partnership is based on each side doing what it does best: the Chinese will manufacture, and the Americans will sell.

I had arrived in Wuhu for Visionary Vehicles’ first trip back since the signing of the deal. There were twenty Americans: executives, market specialists, technical consultants. Every morning, the team ate breakfast in the executive lounge of the Guoxin Hotel; sometimes, if Malcolm Bricklin was holding forth, the meal was videotaped by his son Jonathan. Malcolm Bricklin is a tall, restless man with striking gray-blue eyes, and his voice is deep and smooth. Often, he ate breakfast with Tony Ciminera, Visionary Vehicles’ executive vice-president, and Ronald E. Warnicke, its lawyer. Warnicke is an old friend of Bricklin; one of his specialties is bankruptcy law. In his garage, back in Arizona, he still has a Bricklin SV-1, with gull-wing doors.

“People talk about the Yugo like it was some kind of big failure,” Bricklin said one morning. “Tony’s job back then was to find the least expensive car in the world. That was when Yugoslavia was a Communist country—but a Communist country that was friendly to the West. We found a fifteen-year-old car that had never had to meet any regulations. It was basically a Fiat 128.”

Tony Ciminera said, “We had to bring our own cases of toilet paper, our own fax toner. We had to bring unleaded gas for the cars.”

Bricklin said, “Henry Kissinger was our consultant. Tony made five hundred and twenty-eight changes in the car in fourteen months, and in fourteen months the car was in dealers’ hands.”

The Guoxin Hotel, like everything else in this part of Wuhu, was brand-new. The bookcase of the executive lounge had been filled with books the way you would stock a freshly dug pond with fish. There were twelve copies of “Harvard Marketing Management,” in Chinese, and ten copies of the “M.B.A. Harvard Business School Management Encyclopedia.”

Bricklin emphasized that Chery didn’t plan to export cut-rate cars to America. The company aimed at the mid-level market, believing that cheaper manufacturing and lower distribution costs would allow it to beat competitors’ prices by thirty per cent. “I see the similarities with Japan,” Bricklin said, referring to his experience with Subaru. “In 1968, it was the turning point—where people’s perceptions of Japanese products shifted from cheap to good quality.” He continued, “What the Japanese took twenty years to do, the Chinese can do in five.”

In the old days, the Chinese élite had no interest in business. Following traditional Confucian values, they scorned the merchant class, and emperors rebuffed Western attempts at trade. But the British were determined to buy tea and sell opium, and they were willing to fight to do so. In 1842, after the first Opium War, the Chinese were forced to sign the Treaty of Nanking, which opened five cities to British trade. In 1858, after more fighting, the Chinese agreed to designate ten more ports for foreigners. Four more were opened in 1876; one of them was Wuhu.

The city sits on the east bank of the Yangtze, in the landlocked province of Anhui. In the late eighteen-seventies, the British built a pillared consulate on a hill above the town, and beside the river they set up a customs house, where opium was processed. French Jesuits constructed a church; the Spaniards ran a Catholic school. American Protestant missionaries built a hospital. And then the twentieth century brought a new series of events—the fall of the Qing dynasty, the Japanese invasion, the Communist revolution—and the foreigners disappeared from Wuhu. During the decades of the Communist planned economy, the government invested little in the region.

After 1978, when China entered the period known as Reform and Opening, one of Deng Xiaoping’s key strategies involved export-processing zones—designated areas that encouraged foreign investment through special tax rates. Among these were cities that happened to be former treaty ports, and, as in the old days, they appeared in waves. In 1992 and 1993, after the earliest zones had thrived for more than a decade, the central government approvedthirty-two more. One of them was Wuhu.

The city was a latecomer to the new economy, and it was relatively remote. But local officials believed that this could actually be an advantage in a heavily regulated industry like car manufacturing. Since the eighties, foreign automakers had been allowed to form joint ventures with state-owned Chinese partners, with foreign ownership limited to fifty per cent. The government’s goal was to build an industry quickly, learning from the foreigners while maintaining control. (In China, nobody forgot the humiliation of the treaty ports.) Companies like Volkswagen and General Motors joined with Chinese partners, manufacturing foreign-brand cars while farming out parts production to cheap China-based suppliers. For a time, the strategy was extremely profitable for everybody, in part because the strict controls limited competition.

In Wuhu, though, the officials quietly skirted the regulations. They recruited Yin Tongyao, an Anhui native and a trained engineer, who had been a rising star in one of the joint ventures with Volkswagen. Yin had helped move some of the tooling and equipment of a failed VW plant from Westmoreland, Pennsylvania, to Chang-chun, Jilin. In Westmoreland, the factory had produced Golfs and Jettas. In Changchun, they used the same platform—a car’s basic frame and major components—to build a Chinese version of the Jetta, which eventually became the best-selling car in the country. (The current American Jetta uses a more advanced platform.)

Yin left Volkswagen to become the vice-president of Wuhu’s new company. With funding from the local government, he bought manufacturing equipment from an outdated Ford engine factory in England and moved it to Wuhu. He also acquired manufacturing blueprints for a model called the Toledo from a struggling Volkswagen subsidiary, SEAT, in Spain. The Spanish car used the same platform as the Jetta.

In secret, Yin built an automobile assembly line in Wuhu. National regulations forbade new auto manufacturers from entering the market, so the officials in Wuhu named the enterprise an “automotive components” company. The factory made its first engine in May of 1999. Seven months later, it turned out a car. It used Jetta parts, from suppliers who were supposedly exclusive to Volkswagen. VW was furious, and so was the central government.

But, during the Reform era, as authority has become decentralized, this is a common strategy: push the boundaries first, then ask forgiveness. For more than a year, Wuhu’s officials negotiated with the central government, finally receiving permission to sell their cars nationwide in 2001. (Reportedly, Volkswagen accepted a financial settlement and decided not to sue.)They named their company Qirui, which has connotations of good fortune. It’s pronounced a little like “cheery,” but the official English name was spelled withoutthe second “e,” to indicate that Chery would always be one step removed from the complacency that comes from happiness. By 2004, Chery was selling almost ninety thousand vehicles a year.

When I met with Chu Changjun, the Party deputy secretary of the Wuhu Economic and Technological Development Area, I asked why Chery hadn’t followed the proper channels for establishing a car company.

“It’s like having a child,” he explained. “First you have a child, then you register him. We did it the same way: first we made the cars, and then we registered to make cars.”

Chu was joined by He Xuedong, the deputy director, who added, “If you apply in the traditional manner, you’ll end up waiting for years. During that time, the opportunity may very well pass you by.”

We were in the development area’s new InvestmentServicesCenter, whose marbled lobby was big enough for two badminton nets to be stretched side by side. Some cadres had a pretty good game going when I visited during a lunch break. Chu and He gave me a stack of promotional materials in English, which included the mottoes “An Oasis for Investors” and “Investors Are Our God.” One sentence read, “In Wuhu, we have high quality human resource with low cost.” The next sentence discussed electricity, water supply, and sewers.

The development area was north of town, on the banks of the Yangtze. With Chery as a sort of anchor tenant, Wuhu had already attracted more than a hundred manufacturers, and new plants were going up all the time. Many of the factories had been moved from the southern coast, where costs and wages have increased during two decades of strong economic growth.

One afternoon, I visited Baoshun Road, in Wuhu’s second factory district, which was lined with plants in various stages of construction. Empire Hill planned to start production the following month (airconditioner electrical parts); Shuncheng Electronics was about to add another hundred workers (air-conditioner wiring). Century made four thousand plastic air-conditioner covers a day. At the Wuhu Shijie Hardware Company, when I asked about their products, the gatekeeper opened a desk drawer, grabbed a handful of shiny new nails, and tossed them down like dice. A pretty young woman appeared, with a business card that read “Merry Yeh—International Trade Dept. Manager.” She served me tea in an upstairs office, where a plaque commemorated the company’s coöperation with National Nail Corporation (“More Than Just Nails”), in the United States. Wuhu Shijie produced sixty tons of nails a day. Three hundred and forty workers. Eighteen thousand square metres. Any other questions?

“Where did you get your English name?”

“I named it after Merry Christmas!”

Downtown, the old British Consulate had been converted into the local Communist Party headquarters, and the Spanish missionary school had been turned into a technical college. For years, the former customs house had served as a kindergarten, but now it was abandoned. You could still read the faded Cultural Revolution slogans that had been painted vertically onto the hated symbol of British opium diplomacy. Small-time traders had erected wooden structures around the base, cutting off the slogans:

Chairman Mao’s Writings Are—
In the Midst of Struggle One Learns—

Every day, the Visionary Vehicles team visited the Chery facilities. Technical advisers toured the assembly lines, and they sometimes drove prototypes on a small test track. All the Americans were male, and all of them spoke Detroit: