Jet Development in China creating Jobs in Michigan

NPR MI Radio

A new commercial jet being developed in China is creating jobs in Michigan.

The C919 is being developed by the state-owned Commercial Aircraft Corporation of China, or Comac. The plane could be a big step forward for the aviation industry in China, and a possible competitor to Boeing and Airbus.

But to make it happen, Comac is relying on a number of joint ventures with American companies, and that includes the aviation division of GE, which is headquartered in Grand Rapids.

George Kiefer heads up GE Aviation's Grand Rapids office. He says about 200 engineers are being recruited to work on the C919.

"We're actually recruiting some locally," he says of the hiring process. "And we're also going internationally to hire, to China, as well as the UK and then throughout the United States."

Kiefer says many of the engineers will work in Grand Rapids. But some are also being sent to China, and some to Clearwater, Florida.

Ficano Goes to China, Brings Back Jobs

The Detroit Free Press

Wayne County Executive Robert Ficano first traveled to China in 2005 and will make his sixth visit in November, to court companies and investors interested in doing business in the jobs-starved Detroit region.

It's taken awhile for Ficano's efforts to pay off on a major scale, but last week's news that a Chinese group will buy the $2.1-billion-a-year, 6,200-employee Nexteer auto parts operation from General Motors is a big step forward.

Tempo Group, a Beijing-based auto supplier and key player in the Nexteer deal, was the first Chinese company Ficano lured to Michigan after meeting its owner, Tianbao Zhou, on that first China trip in 2005. Tempo opened a research center in Canton Township two years later.

Ficano told me last week that Zhou apologized to him because the Nexteer acquisition is in Saginaw, not Wayne County. "I said, 'Hey, don't worry about it. It's in Michigan,' " Ficano said.

Another significant aspect of the Nexteer deal is a concessionary labor contract with the UAW that paved the way for the sale. The five-year pact, ratified by Saginaw workers a week before the sale deal was struck, calls for a cash payment to UAW workers in return for giving up raises promised earlier, and a buydown provision to lower the wages of skilled trades workers.

When Ficano first talked with Tempo officials years ago, they were mulling whether to invest in Michigan or in Canada. "They were concerned about Michigan's negative labor reputation," Ficano said.

After Ficano told them Canada had strong labor unions, too, he arranged a meeting between Tempo executives and UAW Vice President Jimmy Settles. Settles convinced them that the union was flexible and could do what was necessary to deliver the productivity Tempo needed, at a wages-and-benefits cost that would enable them to compete.

Four years after that conversation, a big unionized Michigan auto plant is about to become Chinese-owned.

GM's Nexteer steering column operations will be sold to Pacific Century Motors, a joint venture between Tempo and E-Town, the investment arm of the Beijing municipal government. A ceremonial signing is planned Monday at GM's Renaissance Center headquarters; the deal is to close later this year. Purchase price was estimated by Bloomberg News at $450 million.

Last year, Tempo was a joint-venture partner in the $100-million acquisition of Delphi's brakes and suspension business, along with the Beijing government and another Chinese firm, Capitol Iron & Steel.

After a virtual halt to buzz about Chinese investment in the U.S. during the economic upheaval of 2008 and 2009, deals are now getting done, said Peter Theut, founder of China Bridge, a new Ann Arbor consulting firm focusing on trade and investment.

China has capital to invest, at a time when lots of U.S. companies are having a hard time getting bank loans.

It's funny how old hangups, whether they be about Michigan's labor climate or China's currency manipulation, can fade away when two sides need what the other's got.

Mercedes-Benz Sales up 13% over Year in June

BERLIN (AP) — Sales of Mercedes-Benz cars were up 13.2 percent in the year to June as strong demand for the premium brand in China and the United States helped drive growth, parent company Daimler AG said Monday.

Mercedes-Benz sold 113,300 cars worldwide last month, making it the best June performance in its history, Daimler said.

The premium brand's sales in China were up 177 percent last month to 13,700 cars, U.S. sales were up 20.5 percent to 18,300, and sales in Japan gained 26.5 percent compared with June last year to reach 3,400.There also was strong growth in Brazil, Russia and India: Daimler reported sales increases of more than 70 percent in all three of the emerging markets. However, sales in Western Europe were down 3.6 percent at 58,100.

Mercedes-Benz's worldwide sales for the first six months of 2010 were up 15.2 percent from a year earlier to 556,700 cars. The brand delivered nearly 120 percent more cars in China for a total of 60,500; in the United States, its sales rose 21.8 percent to 103,700.

Mercedes-Benz Cars executive Joachim Schmidt said the year-on-year increase in June was the eighth time in a row that sales rose by a double-digit percentage.

"We are also in an excellent position to do well in the months ahead and plan to continue Mercedes-Benz's success with a significant increase in the third quarter," Schmidt said in a statement.

Total sales at the Mercedes-Benz Cars division, which also includes the ultracompact Smart car, were up 10.6 percent in June and 11.6 percent for the year's first half.

Smart sales were down 13.3 percent to 9,600 in June and 17 percent at 50,700 for the first half. However, the company said it expects a new model to be presented later this month to boost sales.

GM Trumpets Growth in China, Says it's Solid Overseas

USA Today

DETROIT — GM told Wall Street on Tuesday that it will be the first global automaker to sell more than 2 million vehicles in China this year, portraying itself as poised for overseas growth a year after exiting bankruptcy protection.

General Motors executives are trying to convince investors that the new company, which emerged from U.S. government-led restructuring last July, is capable of making money for years to come because of its international strength and lower expenses.

The automaker, now a private company 61% held by the government, plans to sell shares to the public as early as the fourth quarter of this year.

Executives are also making the case that GM is clawing back from bankruptcy reorganization, when it needed a roughly $50 billion government bailout.

"All in all, we're the best-positioned U.S. automaker in the world's critical emerging markets," CEO Ed Whitacre told financial analysts during a presentation.

GM's market share in China is 13.3%, which it expects to rise marginally in the next few years. But GM's sales there will grow even with small market share increases because overall Chinese auto sales are expected to keep climbing, including a 20% jump this year to 16.5 million cars and trucks. China passed the U.S. last year as the world's largest auto market.

The automaker runs its GM China operation in a partnership with China's Shanghai Automotive Industry.

GM has led all automakers in sales to the Chinese the past five years, with sales up 67% since 2008, said Tim Lee, president of international operations.

GM plans to roll out nearly 70 new or upgraded vehicles in international markets by 2014, further strengthening its position, Lee said.

Buick is one of GM's most popular brands in China, and this month GM is rolling out first in China a new compact sedan, the Buick Excelle GT. It shares a design with the Chevrolet Cruze, due out this summer, but won't come to the U.S. until next year.

GM will use many car designs that will be distributed across the globe but also has vehicles that are designed specifically for markets such as South America.

Asian, European and South American units are the key to GM's sustained growth and profitability, executives said. GM also is on pace to sell more than 2 million cars and trucks in the U.S. this year. Through May, it sold more than 882,000.

Lee told analysts he is worried that competitors are building inventory in China, which may force discounts. So far GM has not had to cut prices, he said.

GM has repaid $6.7 billion of its financial aid to the U.S. government, but the remaining $43.3 billion was converted to equity. The government hopes to get at least part of the balance back in the public stock sale.

The company made $865 million in the first quarter and is cautiously optimistic that it will have a profitable year.

GM is also in the midst of restructuring its European operations, which long have been a money loser. Mark James, vice president and chief financial officer of Opel/Vauxhall Europe, said GM expects to break even in Europe by 2011 and be profitable going forward.

James said the company plans 8,300 layoffs that should be completed by the end of 2011, including 7,000 manufacturing workers. It also is seeking employee concessions worth $322.9 million per year, including wage freezes, benefit reductions and elimination of bonuses.

In China, Honda to Resume Output but Strike Lingers

Reuters

Honda Motor Co said it would resume building cars in China after a supplier of exhaust systems contained a labor dispute, but workers at another parts maker planned to keep striking for a third day.

The latest labor troubles for Honda flared in the Pearl River Delta factory town of Zhongshan, where workers at a unit of Honda Lock circled parts of the factory perimeter fence, shouting demands for higher wages, watched by local police who blockaded roads and barred journalists from getting close.

Several workers interviewed by Reuters said they were demanding an annual wage hike of not less than 15 percent, along with improved benefits, greater freedom to organize independent labor unions and promises from management not to lay off any of the strikers.

"We're definitely going to strike tomorrow (Friday)," said one of a flood of workers streaming out of the gates in the late afternoon. "Our wages are too low."

Earlier, a Honda Lock official in Japan said shipments of locks would be unaffected for at least a day or two, with enough in stock, but he said a prolonged dispute could disrupt the supply to Honda's car plants.

"We're still gathering information, and we don't know when the negotiations will end," Honda Lock's Hirotoshi Sato said.

The fresh labor troubles for Honda have once again clouded the firm's production outlook in China, after the apparent settlement of two earlier strikes at auto parts suppliers.

Strikes are usually stamped out quickly in China by stability-obsessed officials. But more disputes have been erupting lately, as workers in the world's manufacturing hub are emboldened by substantial wage hikes made by the likes of Foxconn, owned by Taiwan's Hon Hai Precision Industry Co.

Japan's No.2 automaker and iPhone maker Foxconn International Holdings (2038.HK) have been the most prominent companies hit by a growing string of disputes across China between workers resentful of income disparities and employers grappling with rising costs.

Honda, which sold 17 percent of its cars in China last year, has idled its four local factories on and off since May 24, since a first strike at a wholly owned transmissions maker in the city of Foshan, part of China's Pearl River Delta, which makes about a third of the country's exports.

A second strike, at a maker of exhaust pipes and other parts, also in Foshan, ended late on Wednesday, and the plant's Japanese parent said that with production back to normal, shipments to Honda's suspended factories would return to normal on Friday.

The truce could prove to be fragile, with workers at the plant saying differences remain over key conditions, including pay.

Honda had halted production on Wednesday and Thursday at two assembly plants that build the Accord, Fit, Odyssey and City, and said it would resume work on Friday.

One auto analyst said he expected wage hike concessions to have a limited impact on Honda's profits because labor costs accounted for just 5-6 percent of its total revenue even in high-cost Japan.

"If we assume wages in China are between one-fifth and one-third those in Japan, the cost of factory floor workers in China comes to around 2 percent of sales," JPMorgan analyst Kohei Takahashi wrote in a report.

"Assuming factory wages in China were raised a uniform 30 percent, we estimate the impact on the China operating margin would be (a decline of) 0.6 percent."

He estimated that Honda lost about 20,000 vehicles in output from the strikes, likely hitting its Chinese operating profit by about 12 billion yen ($131 million). Honda said it hoped to make up for lost production through overtime and other means.

Some executives say demands for higher pay are inevitable as China's economy gallops ahead.

"We had far worse labor strife in Japan when our economy was booming decades ago," Mitsubishi Motors Corp President Osamu Masuko told Reuters this week.

"It's natural for China to go through this phase as its economy expands. Even so, you don't see anyone pulling out of China. That's not an option because of the market's growth."

Honda shares ended virtually flat on Thursday, while the Nikkei average gained 1.1 percent.

Amway exports American Dream to China

LA Times

For most of her 20s, Tang Shaoping worked at a Nike shoe factory in China. The repetition and long hours left her exhausted. Sleep deprivation and irregular meals took a toll on her health.

Then, four years ago, her sister introduced her to Amway, the American direct-sales company that offers would-be entrepreneurs a chance to earn big by selling vitamin supplements, makeup and dishwashing soap door to door.

Amway is booming in China — and this month it is sending about 13,000 of its top sellers on an all-expenses-paid trip to Southern California. Tang, now 36, is one of the "independent business owners" who earned the perk with annual sales of at least $160,000.

"Since joining Amway, my health and confidence have improved so much. I see Amway as a career for life," she said on the Universal Studios tram as she and her husband, fellow Amway rep Wu Jiayun, 37, snapped photos of a "Jaws" attack and a simulated earthquake.

Amway broke into the China market in 1995, but three years later the government cracked down on direct sales, calling the business model an illegal pyramid scheme. The Michigan-based company changed its approach, opening actual stores, hiring some employees and eliminating its practice of paying direct commissions to sales reps on the sales made by their new recruits.

These days the Amway brand is a favorite among China's fast-growing middle class. An army of at least 200,000 peddles more than 200 products, and Amway's approach works well in a society that values personal connections and word of mouth.

The tourists visiting Southern California this month are the top 5% of Amway's China sales force. They are the faces of a wealthier, more confident and cosmopolitan China.

Zhou Fanyang has worked for Amway since 1995, earning many an award trip. "I've been to more than 40 countries," she said.

This year she used her own money to bring her 5-year–old daughter on the company trip, whose highlight is a visit to Disneyland. In fact, thanks to her recruiting, her entire family is here. Her husband, parents, brother and sister-in-law all have become ace Amway agents. Even her 76-year-old father and 74-year-old mother have built a strong customer base, introducing nutritional supplements to their buddies in a senior-citizen dance troupe.

"People are always resistant at first," said Zhou, waiting for the start of a 3-D Terminator show at Universal Studios. "But they don't say no to health, they don't say no to beauty and happiness. That's what we try to offer to our customers."

Amway sellers are arriving here in waves all month; each group of about 2,500 is spending a week. Experts say the trips add up to a $10-million boost for the local economy. And with some of the top sales reps earning $100,000 or more a year, shopping is an important part of the itinerary.

But many in this week's group complained about the shopping trip that organizers had arranged. They had been bused to the Citadel Outlets, which they deemed not sufficiently high-end.

"I want to buy Apple computers, Lakers Outfits," said Zhen Guoguang, after a three-hour stop at the mall. "They didn't have any of that. Not even Nike or Adidas shoes."

"Many of us still have a lot of money left in our pockets," said his wife, Yuan Baoe. "I know people who came to buy diamonds and Rolexes. I want to buy Dior, Chanel. But all I got was some glasses from Guess. It seems so cheap."

Still, many of the reps bought up Guess bags, Levis, Reebok sneakers, Tommy Hilfiger polo shirts, Samsonite suitcases and pretty much anything that said Calvin Klein — mostly to take home as gifts.

"I already bought six bags to give to friends and customers," said Wang Baohua, 45, trying out various Guess bags in front of a mirror after repeatedly asking the Chinese-speaking tour guides if there really was no Coach store at the outlet.

"We have everything in China. But we want to spend money here to support the American economy," said Cai Jun of northern China.

In the checkout line at the Reebok store, Ping Jie recalled how he and his wife used to live in a two-bedroom apartment before they joined Amway 15 years ago.

"Now we own a stand-alone house, two cars and several other real-estate properties," said Ping, as his wife held a bright blue polo shirt against his back to check the size.

On the Southern California trip, Amway reps eat mostly American food, with only one Chinese meal. For that meal, groups are split up among an array of San Gabriel Valley restaurants so as not to overwhelm any one.

"Western food is very hard for us to get used to," said Zhen Guoguang, as he ate a Cantonese banquet including stir-fried lobster and suckling pig at Mission 261 in San Gabriel. "I can't eat cold food. They serve a lot of cold food on the trip. Salads. Drinks. What do I do? Stay hungry all the time."

Even the Chinese food let some down at Mission 261. "I polished off three plates of chili sauce and it's still not spicy enough," said Zhang Defang, from Sichuan, the Chinese province famous for its numbingly hot cuisine.

The trips here are mostly vacation, but one day is reserved for corporate training at the Anaheim Convention Center.

This week's reps listened to Amway success stories from an illiterate farmer, a retired volleyball player and a former medical doctor. They watched instructional videos on how to give a winning pitch and why the customer is always right. They also learned about new products, including what is billed as a state-of-the-art air filter system.

"The market for this product in China should be huge," said Mathew Du, 48, an American-educated former civil engineer who reinvented himself selling Amway products in China. "Every family can use one, especially with so much home renovation going on and babies in the house."

Chinese Workers Strike, Halt Honda Production

BBC News

Honda has had to halt production at its four Chinese car assembly factories, because of a strike over pay at one of its China-based parts plants.

The Japanese company said talks were continuing to try to resolve the dispute at the parts facility in the southern city of Fushan.

The strike at the plant, which makes gearboxes and engine parts, started last week.

Honda said it hoped to resume production as soon as possible.

Resolution efforts

According to newspaper reports, the 1,900 staff at the parts facility want their monthly wages to be increased from 1,500 yuan ($220; £151) to 2,500 yuan.

"We are still trying to resolve the labour dispute with the help of the local government at the Fushan plant," said Honda's China spokesman Zhu Linjie.

Like most of the world's leading carmakers, Honda has enjoyed a big rise in sales in China.

It sold 219,514 cars in China during the first four months of this year, up 39% on a year earlier.

Honda runs three of its four car assembly factories in China as joint ventures with Chinese carmakers to supply the domestic market.

It has two factories in association with Guangzhou Automobile and one with Dongfeng Motor Corporation.

Honda's fourth Chinese factory makes its Jazz small car model solely for export.

Ford-Geely Deal Spells Out Tech Sharing

The Detroit News

Global automakers have been leery of deal-making with China's fledgling carmakers because of the Chinese history of pirating technology and designs, and in 2008, Ford Motor Co. was no exception.

The Dearborn automaker responded coolly that year, when Zhejiang Geely Holding Co. first wrote to Ford with an offer to buy its Swedish carmaker, Volvo.

Privately owned Geely had been making cars for only a decade and already had been sued for trademark infringement by Toyota Motor Corp.

But last month, after a year of talks, Ford and Geely signed a binding agreement for a groundbreaking $1.8 billion deal for Volvo that will serve as a major test of the Chinese auto industry's willingness to respect the rules of global business.

Prior to the Volvo deal, China's automotive acquisitions were limited to troubled companies and castoff assets that were headed for the scrap heap.

But now, Geely is vaulting ahead by acquiring a global carmaker with state-of-the-art technology and vehicle development, as well as other operations that are still deeply intertwined with Ford's.

According to people familiar with the yearlong negotiations, which took place mostly in London, drawing up the intellectual property agreements took up the largest amount of time.

"When they laid them out, they went from one end of a board room table to the other," said an adviser to Geely, who spoke on condition of anonymity.

In addition to clarifying who owned what technology, the agreements detailed the procedures, sanctions and penalties for any breaches.

"I'm very comfortable with the arrangements we have in place, and the arrangements we've made, if we have issues, to resolve them," said Lewis Booth, Ford's chief financial officer and the U.S. automaker's top negotiator.

Splitting up the technology

The accords give Volvo access to any technology that it needs from Ford to produce the vehicles in its business plan covering the next few years.

Volvo may share some of that technology with Geely, but is not allowed to share some of the exclusive Ford technology to which it has temporary access.

Geely will acquire all the technology that Volvo has developed -- primarily safety and environmental technology.

With the acquisition of Volvo, which is expected to close before October, Geely will obtain a research and development operation comprising 3,000 engineers -- about as many as Ford inherited when it bought Volvo in 1999.

Ford, meanwhile, retains access to technologies jointly developed with Volvo, according to people familiar with the accords.

In any industrial transaction of this size, technology agreements are bound to be complex.

But negotiators are particularly wary when dealing with companies from China, which has a poor record of protecting intellectual property, such as patents, copyrights and trademarks.

Although China joined the World Trade Organization in 2001, foreigners working there say the protection of intellectual property remains a concern.

"There's a well-articulated set of intellectual property guidelines and laws, but there hasn't been consistent enforcement of those laws," said Bill Russo, a Beijing-based consultant with Booz & Co.

A December AmCham/Booz survey of business people working for foreign companies in China found that China had made little progress in the past three years in protecting intellectual property.

"Rulings in favor of foreign companies in China are still rare," said Michael Dunne, president of Hong Kong investment and advisory firm Dunne & Co.

Toyota lost its case against Geely in 2003, after a Chinese court concluded that Geely's logo wouldn't be easily confused with Toyota's.

Attorneys with experience in China say it's difficult to win intellectual property suits because the rulings may be subjective.

Increasingly, companies such as Ford are reinforcing their claims by specifying sanctions or penalties incurred in any breach of intellectual property in the sales contract.

In such cases, the courts rule on the basis of contract law, said attorney Justina Zhang at TransAsia Lawyers in Beijing.

Power of a brand

From Geely's standpoint, Volvo's technology wasn't the main reason that Chairman Li Shufu pursued the deal, which was suggested to him by a banker at Rothschild & Sons in 2007.

An adviser to Li, a farmer's son who became one of China's first industrial tycoons, said Li believes Geely's technology will attain world-class standards within a decade.

But it will take at least twice as long, Li believes, to command similar prices on Chinese-branded vehicles. He was eager to obtain a strong brand as well as Volvo's distribution network.

Auto analysts say the Volvo acquisition will help Geely gain expertise in vehicle development -- an area where China's fledgling carmakers are all weak. Geely has only been making cars since 1998, while expertise in vehicle development is built over five-year product cycles.

"It's like you can go to medical school and be a straight-A student, but until you've been a doctor for 10 years, you're not going to be that good at it," Russo said.

But it won't take long for the Chinese to catch up.

"We probably had this discussion about Japan 40 or 50 years ago, and we probably had this discussion about Korea 10 to 20 years ago," Booth said.

"The world is accelerating, and China is accelerating very fast."

Ford, GM Promote Car Loans in China as 90% of Drivers Prefer to Pay Cash‏

Bloomberg

Pi Wenhui would have bought a 249,800 yuan ($36,600) Mazda if she had gotten a loan. She couldn’t, so like 90 percent of Chinese drivers she paid cash -- and bought a cheaper car.

Carmakers including Ford Motor Co., Nissan Motor Co., Beijing Automotive Industry Holding Co. and Guangzhou Automobile Group Co. are anticipating that will change as China’s government is set to introduce policies to encourage auto lending in the world’s largest car market.

“We see a lot of potential in auto financing,” Joe Hinrichs, Ford’s president for the Asia-Pacific region, said in an interview at the Beijing Auto Show.

Automakers estimate sales growth in China will slow to as little as 10 percent next year from as much as 20 percent this year and 46 percent in 2009. Enabling more of China’s 1.37 billion people to borrow for vehicles would have a “big stimulus impact” on sales, Xu Changming, research director at China’s State Information Center, said in Beijing on April 22.

“For the next 5 to 10 years, auto financing will be the biggest thing for the industry and the most important booster,” said Yale Zhang, a Shanghai-based director at CSM Asia, an auto consulting company.

U.S., India

In contrast to China, 85 percent of car drivers in the U.S. take out loans and 65 percent of buyers in India borrow, according to the State Information Center, a government advisory body. The government may introduce policies to boost auto lending this year, including making it easier for car financing companies to raise capital by selling corporate bonds, the center’s Xu said.

Guangzhou Auto, a partner of Honda Motor Co. and Nissan in China, plans to open an auto financing unit this quarter, General Manager Zeng Qinghong said. Beijing Auto will begin offering financing this year, President Wang Dazong said.

“We’re counting on auto financing as a new way to generate growth,” Wang said in an interview in Beijing. “There is a lot of room to develop the business in China.”

Zhejiang Geely Holding Group Co is also planning to start an auto credit business, Chairman Li Shufu said.

Currently, auto financing companies in China mainly provide loans to dealers, 90 percent of which are independently owned, according to the China Automobile Dealers Association.

GM, Toyota

Ford, General Motors Co. and Toyota Motor Corp.’s local financing units provide loans to consumers as well as dealers, including those that are unable to borrow directly from banks.

Chen Guangjun, general manager of the Beijing Zhong Ye Toyota dealership, said about 12 percent of his customers buy on credit. The outlet accepts applications that are ultimately handled by Toyota’s financing unit.

Honda doesn’t have a financing business in China, so dealers such as Beijing Fanlv Business & Trading Co. introduce buyers to a bank if they need loans, general manager Wen Hai said.

In China, 80 percent of auto loans come from banks, while in other countries 80 percent are from auto financing companies, the State Information Center’s Xu said.

“The number of people using loans will rise,” said Tao Ye, president of the company that owns Beijing Zhong Ye. “In particular, there are a lot of people who use financing to buy second cars.”

The government is considering encouraging auto loans even as it targets a 22 percent reduction in overall new lending from a record $1.4 trillion last year. Earlier this month, the government announced curbs on loans for third-home purchases, increased down-payment requirements and higher mortgage rates as it stepped up efforts to prevent a bubble.

Good Savers

Persuading customers to take out loans may be challenging because the Chinese traditionally use cash for big-ticket purchases like cars, CSM’s Yale said.

“The Chinese are very good savers,” said Robert Graziano, head of Ford’s China operations. “It will be a relatively slow process.”

The cost of the credit approval process is often too high for small loans to be profitable for lenders. About 69 percent of car sales in China last year was for vehicles with engines no larger than 1.6 liters, which cost as little as 21,800 yuan.

Boosting financing may also require making it easier for customers to get credit approval. Because reliable credit information on consumers is often lacking, some banks hire outside specialists to gather information about applicants, said Beijing Fanlv’s Wen. Sometimes the specialists go to the applicant’s house or workplace to gather and verify information.

About half of applications are rejected, as many of them fail to provide enough information, said Zheng Xinhe, general manager of the Beijing Yinghua Lexus dealership. Once accepted, defaults are very rare, he said.

‘Totally Worn Out’

Pi, the would-be Mazda buyer, gave up trying to get credit for a Mazda6 car. To get the loan, she needed to own real estate in Beijing, which she doesn’t.

If Pi, 28, wanted to use her parents’ property as security for the loan, the bank would need to pay home visits to both her and her parents to interview them, she said. She disliked the idea as her parents aren’t used to buying things on credit, she said.

Pi also decided against using a friend who owns property as a guarantor, because the car would then need to be registered in her friend’s name. She didn’t qualify for a credit card suggested by the Mazda dealer.

“Applying for automobile financing is way too complicated,” said Pi, who wound up paying cash for a Kia Motors Corp. Sportage sport-utility vehicle, which cost her 203,000 yuan including taxes. “I was totally worn out by the difficulties of getting a loan.”

GM's Deal to Sell Hummer to Chinese Company Falls Through

The Wall Street Journal

General Motors Co.'s Hummer line of beefy SUVs is headed for extinction after a deal to sell the brand to a Chinese manufacturer fell apart.

Would-be buyer Sichuan Tengzhong Heavy Industrial Machinery Co. said Wednesday it failed to win approval from Chinese regulators for its $150 million bid.

GM said it will begin winding down Hummer, a brand that until a couple of years ago was one the auto maker's biggest money makers.

The Hummer sale is the latest deal to fall apart for GM as the company works to shed brands around the globe. The auto maker's efforts to sell its Saturn brand unexpectedly collapsed last year; later the company reversed plans to sell its Opel European unit after months of intense negotiations failed to produce a favorable deal.

Tengzhong's efforts to get clearance to buy Hummer became entangled in China's complicated regulatory system, according to people familiar with the situation. On Wednesday, China's Assistant Commerce Minister Wang Chao said his ministry has never received an application from Tengzhong. The company, however, said it tried and failed to obtain approval.

"Tengzhong worked earnestly to achieve an acquisition that it believed to be a tremendous opportunity to acquire a global brand at an attractive price," the company said in a statement.

GM, in a statement, said it would begin as orderly wind-down of Hummer operations. The company said it will continue to honor Hummer warranties.

"We have since considered a number of possibilities for Hummer along the way, and we are disappointed that the deal with Tengzhong could not be completed," John Smith, GM vice president of corporate planning and alliances, said in a statement.

Hummer, evolved from the military vehicle known as the Humvee, was born in 1998 amid America's growing penchant for brawny sport-utility vehicles.

GM sold 9,046 Hummer SUVs in the U.S. last year, down from more than 71,000 in 2006, before gas prices soared and big trucks fell out of favor.

GM announced in June 2008 it was looking to sell the brand and, a year later, it appeared Hummer could find a second life with Tengzhong. Chinese approval for the deal was never a sure bet, given the government's recent efforts to press Chinese auto companies to make smaller, more efficient cars.

China's auto makers have grown quickly in recent years, and several have shown aspirations to expand by buying foreign firms. At the time, GM estimated the deal would save 3,000 U.S. factory jobs. Hummer has around 370 dealers globally, including 153 in the U.S.

GM's Plan to Sell Hummer to Chinese Company Delayed

USA Today

DETROIT — General Motors' plan to sell the hulking, once-hot Hummer line to a Chinese heavy equipment maker has been delayed by a month, officials said Monday.

General Motors and Sichuan Tengzhong Heavy Industrial Machinery said they are extending the deadline to complete the transaction until Feb. 28 pending final approval by the Chinese government. The previous deadline was Jan. 31 for a definitive agreement to sell the line once synonymous with America's love for big off-road vehicles.

Hummer spokesman Nick Richards said the deal has cleared U.S. regulatory hurdles. He called it a complex agreement but said both companies are "optimistic the deal will be completed" by month's end.

Sichuan Tengzhong said in a statement it's cooperating with the approval process.

Financial terms weren't disclosed, but Hummer has been estimated to be worth about $150 million. GM's bankruptcy filing last summer said that the brand with its born-in-the-military cachet could bring in at least $500 million.

Hummer hit the streets for civilian use in 1992 while owned by AM General, which makes Humvees for the U.S. Army. Actor Arnold Schwarzenegger, now the governor of California, was among the first customers.

The brand, whose smallest model gets 16 miles per gallon in combined city and highway driving, sold well until the middle part of the last decade when fuel prices began to rise. Sales peaked at 71,524 in 2006.

GM is selling Hummer to focus on core brands Chevrolet, Cadillac, Buick and GMC.

GM signed a deal last week to sell its Saab brand to small Dutch automaker Spyker Cars for $74 million in cash plus $326 million worth of preferred shares in Saab. It hinges on a $550 million loan from the European Investment Bank.

The sale came after an earlier attempt to sell Saab to another Swedish automaker fell through, and after GM's bid to sell the Saturn brand also collapsed.

Round-the-Clock Car Factories in China Still Can't Fulfill Drivers' Demand

Bloomberg

Nissan Motor Co.’s factory in central China is making cars almost 24 hours a day, yet Pan Xiaowei still waited three months for her new Tiida compact to arrive at the dealership.

“It wasn’t like this a couple of years ago,” said Pan, 34, whose husband runs a property development company in Shandong province. “We used to buy and get a car straight away, and now you have to pre-order and wait.”

China overtook the U.S. last year as the world’s largest automobile market with sales surging 46 percent to 13.6 million, according to the China Association of Automobile Manufacturers. Nissan, Ford Motor Co. and Honda Motor Co. are running their Chinese factories at full capacity, with overtime and weekend shifts, and still can’t deliver enough cars.

“Based on our current growth rate and planning assumptions, the capacity of our two facilities will not be able to accommodate the expected future demand for our products,” Nigel Harris, general manager of Ford’s venture with Chongqing Changan Automobile Co., said in an e-mail.

About 99.7 percent of cars made in China through November last year were sold, the association said. Foreign automakers are expanding assembly lines as buyers in secondary cities beyond Beijing and Shanghai benefit from government subsidies of at least 5 billion yuan ($732.5 million), a sales tax cut and 8.9 percent economic growth.

Rural Consumption

Car sales have been fueled by demand in rural areas where the growth rate exceeded that of urban regions last year for the first time, Trade Minister Chen Deming said in a Jan. 13 interview with state broadcaster CCTV.

“Spending power in the medium and small cities is rising, and demand there has surpassed those in bigger cities,” said Wei Tuo, a Henan province dealer for Nissan’s joint venture with Wuhan-based Dongfeng Motor Group Co. “Cars are no longer considered a luxury item but a standard consumer product.”

Wei’s company has about 40 outlets in the central region selling several brands. About 55-60 percent of sales come from middle- and small-sized cities, he said.

Nissan is the No. 1 Japanese automaker in China, with last year’s sales rising 39 percent to 756,000, outselling Toyota Motor Corp. and Honda, according to the three companies. Nissan’s top seller is the Teana.

Running Almost 24 Hours

Nissan is spending 5 billion yuan to expand its Hubei province plant to build up to 600,000 vehicles annually from the current 430,000, spokeswoman Kana Minamidate said. That central China factory makes the Tiida compact and Livina series popular in secondary markets, she said.

“The plant was originally operating with two shifts but now we have three shifts to build cars almost 24 hours a day,” Minamidate said, adding that customers still wait for deliveries.

Nissan also is spending 1 billion yuan on a light- commercial vehicle factory in the eastern city of Zhengzhou that will open this year and build up to 120,000 vehicles annually.

China requires overseas carmakers to work with local partners, who must own at least 50 percent of joint ventures. These ventures produced eight of the 10 best-selling cars last year, according to automobile association data.

Changan Ford Mazda Automobile Co. has plants in Chongqing and Nanjing building cars “at maximum allowable overtime and weekends,” Harris said. The company will open a $490 million factory in Chongqing in 2012 making up to 150,000 vehicles a year, boosting overall capacity to 600,000.

‘More Traffic Jams’

Near-term growth will be concentrated in eastern and central regions, and cities outside Beijing, Guangzhou, Shanghai and Shenzhen, Harris said. The venture opened more than 65 percent of its new dealerships last year in smaller cities, and that proportion is expected to reach 75 percent in the next few years.

“There are more traffic jams in Chengdu than in Beijing,” said Zheng Minda, vice general manager of a Ford dealership in the Sichuan province city. “Demand is greater than supply.”

Customers wait at least a month for delivery, he said.

The government unveiled stimulus packages and new bank lending to spur domestic consumption after GDP growth slumped for eight straight quarters and exports declined for 14 months as the global recession took hold.

Still, automakers face possible overcapacity in China, according to Chen Bin, who oversees regulation of the country’s auto industry at the National Development and Reform Commission.

China has more than 100 automakers and they should “keep their heads cool” to prevent expanding production beyond demand, Chen said in September.

Income Gap

Urban residents earn about three times more than rural, who comprise more than half of China’s 1.3 billion people, according to government statistics.

Rural Chinese buying a new minivan or light truck can get a subsidy of 10 percent of the purchase price, up to 5,000 yuan. Those replacing light trucks can get another 5,000-18,000 yuan.

The government also reduced the sales tax on new vehicles with engines of 1.6 liters or smaller to 5 percent from 10 percent. It said Dec. 10 it was raising the rate to 7.5 percent.

Honda, which opened 55 dealerships mostly in small cities last year, is focusing expansion in suburbs and exurbs of major cities, said Masayuki Igarashi, general manager of its China operations office in Tokyo. Its best-selling model is the Accord.

Chief Financial Officer Yoichi Hojo said in November that the company, which makes about 550,000 cars a year in China, doesn’t have enough capacity. The Yokohama, Japan-based automaker plans to increase production at its Hubei province plant to 240,000 cars this year from 200,000.

The Wuhan factory runs at full capacity and built 210,000 units last year with overtime and weekend shifts, Honda spokesman Yoshiyuki Kuroda said. It makes CR-Vs, Civics and Accords, and wait times are at least a month, he said.

Pan, who lives between Beijing and Shanghai, said a lot of Chinese households now own two cars.

“It used to be that only company bosses could afford a car, but now teachers and office workers can also buy one,” she said.

Henry Ford Raising Wages May Give China Tips on Creating Worker Prosperity‏

Bloomberg

Jennifer Granholm works on her resume while Michigan's union jobs get shipped to China.

“Little” Xie says he wants to own one of the autos he helps build at Ford Motor Co.’s assembly plant in the Yangtze River city of Chongqing. With his mortgage payment taking about 60 percent of his 2,000 yuan monthly pay, that won’t happen soon.

“It isn’t even worth talking about company incentives to help buy a car, since I can’t afford one in the first place,” said Xie, 28, a six-year Ford employee, as he approached the factory gates for his night shift. Xie, whose nickname comes from his youthful age, asked that his full name not be used.

Higher wages for people like Xie would help resolve China’s biggest economic challenge: shifting away from growth fueled by exports and investment and moving toward an economy driven more by domestic consumers. China’s communist leaders might learn a lesson about how to create a more prosperous working class from American industrialist Henry Ford.

The founder of the auto manufacturer that bears his name generated headlines around the world in January 1914 by doubling the average autoworker’s pay to $5 a day. The move made Ford’s Model T more affordable, created a more stable workforce and helped stoke the growth of the U.S. middle class, according to Bob Kreipke, the historian for the Dearborn, Michigan-based company.

“This allowed people to increase their buying power and, at the same time, they produced a better product,” Kreipke said.

Consumer Culture

Low wages in the world’s third-largest economy are slowing the rise of a consumer culture that Premier Wen Jiabao and President Hu Jintao have said China needs to maintain expansion at the 8 percent a year that will generate jobs for its 1.3 billion people. The current growth pattern is “unsustainable,” Wen said Dec. 27.

That hasn’t stopped China’s auto industry from booming, with sales last year of 13.6 million vehicles, eclipsing the U.S. as the world’s top market for the first time, according to figures from the China Association of Automobile Manufacturers in Beijing. The surge in purchases was spurred partly by government subsidies to help farmers buy autos.

Encouraging higher pay might help sustain the boom and boost consumption, which currently accounts for about 35 percent of China’s gross domestic product, compared with 70 percent in the U.S. It would also help ease income gaps between the rich and poor, which are higher than those in South Korea and Taiwan at similar stages of development and have led to riots and other labor unrest.

Buying Power

Ford’s $5 daily pay allowed an employee to buy a Model T that cost $440 with the equivalent of about four months’ wages. Chinese factory workers averaged 24,192 yuan ($3,544) a year in 2008, according to figures from the National Bureau of Statistics in Beijing, so it would take more than three years worth of wages for them to afford the cheapest car advertised on the company’s Chinese-language Web site: a four-door hatchback with a 1.3 liter engine listed for 78,900 yuan.

While the auto company declined to comment on worker pay, Ellen Hughes-Cromwick, Ford’s chief economist, said Ford projects growth 10 years into the future for the countries where it operates, and it sees China’s economy in a period of expansion characterized by rapid rises in employee compensation similar to South Korea’s economy starting in the 1960s.

“We are at a situation where wages are moving up and doubling in a very short period of time,” Hughes-Cromwick said in a telephone interview from Dearborn. “We do expect takeoff to generate pretty substantial wage gains.”

Boost Pay

One way China’s government might help boost pay would be to raise the value of the yuan, said Nicholas Lardy, who studies the Chinese economy as a senior fellow at the Peterson Institute for International Economics in Washington.

U.S. and European officials have said China keeps the yuan artificially low to boost sales in foreign markets. An undervalued currency encourages manufactured exports at the expense of developing the more labor-intensive service sector, depressing job growth and keeping wages low, Lardy said.

“Appreciation would lead to more rapid growth in the demand for labor and thus to more employment growth and more wage growth,” he said.

China should also spend more on education for peasants and migrants to raise their skill levels and employment prospects, said Xiao Geng, director of the Brookings-Tsinghua Center for Public Policy in Beijing.

Rural Migrants

Henry Ford employed some of the millions of eastern European immigrants who poured into the U.S. a century ago, as well as migrants from the South and Midwest lured by high wages. China’s leaders must deal with hundreds of millions of rural laborers coming to cities, who put downward pressure on salaries.

“Unskilled workers are condemned for generations to low wages,” Xiao said.

Even a skilled worker like Gong -- who also asked that his full name not be used -- said he makes only 6 yuan ($0.88) an hour as a welder at Ford’s Chongqing plant, 9 yuan an hour for overtime.

“I have a dream of someday buying a car,” said Gong, 29, as he walked home in the rain after a 10-hour shift. “I guess it will take six years of saving.”

Ford Motor Nearing A Deal To Sell Volvo To Geely

Reuters

Ford Motor Co (F.N) said on Wednesday it is nearing an agreement to sell its Volvo Swedish cars unit to China's Geely in a deal that underscores China's arrival as a major force in the global auto industry.

The deal, which Ford said it expects to sign in the first quarter and close in the second quarter of 2010, would be the largest acquisition of an auto brand by a Chinese company.

It comes at the end of a year that has seen China overtake the United States as the world's biggest auto market in a reversal of fortune that would have been unthinkable only a few years ago.

Traditional Ford rival General Motors Co, meanwhile, is moving to abandon its own Swedish brand, Saab, after selling some assets to another Chinese automaker, Beijing Automotive Industry Holding Corp or BAIC, for $200 million.

Geely Automobile Holdings Ltd is China's largest private automaker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means "lucky" in Chinese.

As U.S. automakers have faced deepening distress over the past two years, Chinese automakers have had preliminary talks about buying a range of assets, but those deals have been small in scope and difficult to close until now.

SIGNAL TO CHINESE GOVERNMENT

Dearborn, Michigan-based Ford Motor said it had agreed on all substantial terms in a deal to sell Volvo to China's Zhejiang Geely Holding Group, parent of Geely Auto.

The unusual update on negotiations from Ford and Geely was seen as a signal to China's government, which must approve the sale. Such approval is needed for Geely to be able to borrow $1 billion or more from Chinese banks.

"While some work still remains to be completed before signing ... Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010," Ford said in a statement on Wednesday.

The value of the deal has been estimated at $1.8 billion -- far short of the $6.45 billion Ford paid for Volvo in 1999.

But for Ford, closing the sale would give it cash at a time when it is looking to repay debt faster, as the No. 2 U.S. automaker strives to return to profitability by 2011.

Should Ford close on Volvo's sale as expected, it will have succeeded in divesting all three of its luxury brands. It sold Jaguar and Land Rover to India's Tata Motors Ltd in 2008 and sold British-based Aston Martin in 2007.

Shares in Ford topped $10 on Wednesday for the first time since 2005. The stock has more than tripled since the start of the year as Ford has gained market share and steered clear of the government-directed bankruptcies that remade Chrysler Group LLC and GM.

In contrast with Ford, GM has struggled to unload brands in the downturn. A deal to sell Saturn collapsed, GM pulled plans to sell Opel, its sale of Hummer has been delayed, and Saab would shut without an eleventh-hour deal.

BAIC, China's fifth-largest automaker, bought rights to older Saab models from GM. It said on Wednesday that it would launch an aggressive campaign to develop its brand both at home and overseas based on the deal.

The rest of Saab faces closure unless a last-gasp offer by Dutch-listed luxury car maker Spyker Cars NV is accepted by GM, which said last week it would begin winding down the brand it has controlled for 20 years.

BAIC, which does not have its own car brand, said the acquisition of Saab tooling has cut four to five years from its vehicle development plans.

AGGRESSIVE GOAL

BAIC plans to immediately start integrating Saab technology into its vehicles, with an aim to sell 100,000 vehicles based on its own development in 2011.

Tan Kunyuan, an analyst at Changjiang Securities, said that target for BAIC would be aggressive. "It will take at least a year for the market to recognize the brand, and BAIC probably would need to modify the appearance of Saab cars to fit with Chinese market demand."

The Beijing-based automaker is in a production partnership with Daimler AG and Hyundai Motor Co, with most of their joint output for sale in the domestic market.

BAIC's Saab acquisition includes the intellectual property for Saab's 9-5 and 9-3 sedans and some equipment to make them.

The rise of China's auto market and the collapse in the U.S. market have both been more dramatic than analysts and industry planners had expected.

Auto sales in China, including commercial sales, have more than doubled since 2005, rising near 13 million units this year from 5.76 million just four years ago.

By contrast, the U.S. market has plunged from 16.95 million vehicles in 2005 to near 10.4 million this year.

Next In The Trade War With China: Paper

NewPage in Escanaba, Michigan, is one of three paper firms that
filed an antidumping case against China and Indonesia.

Story from the Wall Street Journal

Three paper companies and the United Steelworkers filed an antidumping case Wednesday against China and Indonesia, making good on the union's threat to protect other U.S. industries after winning a recent trade decision against China.

The petitioners said the timing of their complaint, on the eve of the G-20 economic summit here, was coincidental. But it threatens to raise tensions between the U.S. and its trading partners, particularly China, which is smarting from President Barack Obama's decision this month to place hefty tariffs on imported Chinese tires.

The complaint alleges China and Indonesia have been dumping tons of shiny, coated paper used, for example, in car brochures and annual reports. The case is being pursued through a different legal avenue than the one that yielded the tire tariffs and doesn't require approval by Mr. Obama.

But it nonetheless puts the White House in a delicate position, especially since Chinese delegates are expected to confront the administration with allegations of protectionist moves by Washington. Leaders of the G-20 have pledged to resist efforts to curb job losses in their countries by restricting access to their markets. A White House spokesman declined to comment.

Gilbert B. Kaplan, a Washington attorney for the petitioners, said the complaints weren't timed to the G-20 economic summit. He said the four separate petitions alleging dumping and subsidies by the two countries -- totaling more than 2,000 pages -- "have been prepared for some time."

The companies need to prove to the Commerce Department that the governments of China and Indonesia provided subsidies to coated-paper producers, and that imports were sold in the U.S. at prices below the home-market price or the cost of production. The petitioners also need to show the U.S. International Trade Commission that the paper imports caused material injury to the U.S. market or threaten to. "We have very strong evidence on all the factors which are necessary to prove this case," Mr. Kaplan said.

A spokesman for Indonesia's Trade Ministry declined to comment because the government has not yet viewed the antidumping petitions.

A spokesman at the Chinese Ministry of Commerce said: "The rising trade protectionism is worrying. The U.S. should be aware that trade protectionism is a double-edged sword and will do no good to either side."

The tire case was brought under a special provision for countries to temporarily shield their markets from disruptions caused by China's entry into the global trading system. The paper case, by contrast, is a more conventional trade dispute.

The case highlights the growing role of labor unions in U.S. trade issues. During last year's election, Mr. Obama promised to get tougher on trade -- a pledge that won him union votes. Unions now want him to make good on his promise and viewed the tire tariffs as a crucial step.

"Neither the companies nor the union will tolerate being obliterated without asking our government to investigate and enforce the rules of fair trade," said Leo Gerard, president of the Steelworkers union.

The Steelworkers represent about 6,000 hourly workers at paper mills in nine states operated by the three companies that joined in the complaint. The filings claim that imports of coated paper grew nearly 40% in the first six months of 2009 -- to 185,422 tons -- compared with the same period last year; shipments by domestic producers, at the same time, were estimated to have fallen by about 38%.

China and Indonesia are thought to account for nearly 30% of the U.S. market for coated paper in the first half of 2009, nearly double their share from the first half of 2008. Total U.S. sales for coated paper in 2008 were estimated at $1.8 billion.

This isn't the first time the U.S. has wrangled with China over coated paper. In 2007, the Commerce Department slapped temporary tariffs on coated paper from China, Indonesia and South Korea, after U.S. producers made similar claims. The decision was later reversed by the International Trade Commission.

Mark Suwyn, executive chairman of NewPage Corp., one of the paper companies that filed the petitions, said the trade conditions of 2007 have grown more severe. He estimated that three-quarters of coated-paper imports are from China, which has invested in factories capable of producing far more paper than the country can use.

Mr. Suwyn said the rapid growth of Chinese paper imports -- estimated at $269 million in 2008 -- showed that paper was being dumped. "It's a commodity business," he said, "so the only way they could grow that big is by coming in with predatory pricing."

The other paper companies involved in the case are Appleton Coated LLC of Kimberly, Wis., and Sappi Fine Paper North America, the U.S. arm of South Africa's Sappi Ltd. A Commerce Department spokesman said the agency has 20 days to determine if the petitions meet the statutory requirements to begin an investigation.

The U.S. companies allege China is unfairly granting subsidies to its domestic paper producers in for the form of low-interest loans, tax subsidies and grants. Similarly, they allege that Indonesian paper companies are benefiting from government loans, as well as timber from government-owned land that is sold at below-market prices.

Ford Motor Expanding Asian Presence

As Posted to the Wall Street Journal

Ford Motor Co. is making a major push this week in Asia -- long a weak link in its global operations -- as part of an ambitious strategy started three years ago by Chief Executive Alan Mulally.

In India on Wednesday, Mr. Mulally unveiled a new low-cost small car specifically developed for Asia that will be built at a newly expanded Indian plant. The vehicle, called the Figo (pronounced fee-go), will be sold in India and exported to other countries in the Asia-Pacific region.

On Friday, Ford will announce plans to open its third assembly plant in China, according to people familiar with the matter.

The two moves will significantly increase Ford's production capacity in the fastest growing region in the global auto industry, and will give the company a new car that is priced and sized for a large swath of buyers across Asia.

"Alan fully recognizes that we had to be strong in all three areas of the world if Ford Motor Co. was going to be a cohesive, integrated and successful company," said John Parker, executive vice president of Ford's Asia-Pacific operations.

The new small car -- Figo is colloquial Italian for "cool" -- is due to be launched in 2010. It was developed as part of a $500 million investment in India announced January 2008. Part of the investment doubled capacity at a plant near Chennai to more than 200,000 cars a year.

The tiny four-door hatchback with cat-eye headlamps gives Ford an entry into an increasingly important segment of the Asian market.

The vehicle is expected to sell for under $10,000, within reach of many people in India's growing middle class.

Ford believes the Figo will appeal to customers who want more than a bare-bones vehicle, such as the $2,000 Nano developed by Indian auto maker Tata Motors.

For Ford, which sold only about 30,000 vehicles in India last year, the Figo "will be quite crucial for further growth," said Asish Mathew Jose, market analyst for Segment Y, an automotive research company in Goa, India.

In China, which is expected to pass the U.S. as the largest auto market this year, Ford has two plants that together can produce about 447,000 cars a year. The company is expected to announce a third plant with partner Chonqing Changan Automobile Co., bringing total capacity to more than 600,000 vehicles a year.

Ford still faces many challenges in Asia, however. Even with the new capacity it still trails key competitors in China.

Toyota Motor Corp. can make 800,000 vehicles a year, and expects to lift that to more than one million in a few years, a Toyota spokesman said. General Motors Co., which got an earlier start in China than Ford, has partnerships and joint ventures that give it total capacity of 1.29 million vehicles a year, including small commercial vans.

The Ford name isn't uniformly known in India or China, and its dealer networks are still developing. In China, Ford has 216 full-service dealers, compared to Toyota's more than 500 and GM's more than 800. Ford accounts for about 2% of car sales in the Asia-Pacific market.

Shoring up Ford's Asian operations has been a critical goal for Mr. Mulally, a former Boeing Co. executive with substantial experience in the region. But since arriving at Ford in 2006, Mr. Mulally has had to focus on keeping its U.S. operations afloat.

He is credited with having taken quick action to put the company in a much stronger position than rivals GM and Chrysler Group LLC, both of which went through bankruptcy and took government bailouts.

At the same time, however, Mr. Mulally also dispatched executives to find out what was holding up growth in Asia. They found an organization that wasn't focused enough on the region's two giant markets, China and India.

In China, Ford has lagged behind GM, Toyota, Volkswagen AG and other Western auto makers. According to J.D. Power & Associates, Ford is the No. 12 auto brand in China in terms of sales.

The company has been slowed in part because its partner is located in Chonqing, in the less developed western provinces. There, Ford hasn't always been able to find suppliers for certain components, forcing it to use more expensive imported parts, Ford officials said. That hurts the profits, they said.

GM and VW, in contrast, have plants near Shanghai, an area teeming with auto suppliers and consumers with cash to spend.

In India, Ford struggled early on with models that proved too expensive for Indian consumers. Now, the Fiesta subcompact is its top seller, and a model called the Endeavor is the country's top-selling sport-utility vehicle.

In 2008, even as Ford's problems worsened in North America, the company mapped out a plan to invest $2 billion to become more competitive in Asia. It started work on the Figo and recently, Ford said it would move its Asian headquarters from Thailand to Shanghai.

Ford is now working to consolidate manufacturing in four regions. It also seeks a more cohesive regional approach instead of country-by-country operations, and is working to enhance the Ford brand.

"We concluded that we wanted to focus on the Ford brand because this is what you were going to have to do if you wanted to create a Ford powerhouse around the world," Mr. Mulally said in an interview.

While committed to building products in the markets in which they are sold, Mr. Mulally said he wouldn't rule out making Fords in Asia for the U.S. market. When GM recently considered a similar move it caused an uproar at the United Auto Workers union.