Burned German exec learns hard lesson from Chinese

Douglas A. Bolduc is News Editor of Automotive News Europe
Former Volkswagen and Hyundai executive Hans-Ulrich Sachs was optimistic, energetic and confident in late-2006. He was launching China's Brilliance Jinbei Automotive in Europe and was determined to make the brand a success.

Today, Sachs is disappointed, downbeat and unsure whether Europeans truly understand all the nuances of a relationship with the Chinese.

"The problem is that you never know whether the Chinese will keep all the promises they make," Sachs said in an interview. "We had a commitment to the dealers and importers, but at the end of the day, nothing."

Sachs' company, HSO Motors Europe, was Brilliance's importer for Europe.

The German executive said the company was dissolved because he could not get the Chinese to lower the starting prices of their models for Europe, the BS6 and BS4 sedans.

“They didn't want to lose any money per car,” Sachs said. “We told them that this is the entry fee you have to pay to get established in Europe. They told us that we should make the investment to cover the shortfall; that we would have to subsidize the brand.”

Sachs refused.

Unable to compete on price with rivals such as Skoda and Kia, Brilliance's sales halted.

Later, Sachs found out through contacts in China that Brilliance had stopped the engineering work needed to get its cars ready to meet European safety and emission standards.

“We asked some of the BMW guys working together with Brilliance in China and that is how we got the information that Brilliance stopped everything,” Sachs said.

Brilliance is BMW's joint-venture partner in China.

About the same time Sachs' relationship with Brilliance was falling apart, BMW announced that the partners would split the cost of a 560 million euro ($769 million) new plant in China. The partners' second factory is due to start production in 2012.

Today, Sachs is running Hans-Ulrich Sachs GmbH, a management company that offers consulting and restructuring services out of offices in Stuttgart and Bremen.

He said he is willing to share his recent experience with others.

"My recommendation to all Europeans is that if they deal with the Chinese, they should be very cautious,” Sachs said. “This doesn't mean that I am completely against doing business with the Chinese. They just have a special business behavior and we have to understand that.”

Perhaps the real solution would be for the understanding to work both ways.

Brilliance's unwillingness to adjust its European starting prices to cope with last year's changing market conditions is a sign that it is not ready to be a global player. Right now, Brilliance probably doesn't care about this because it doesn't need to be a success in Europe when it has the potential to make a fortune satisfying demand at home.

The problem is that one day Brilliance will want to get started in Europe, and it will difficult for it to make people forget this unfortunate chapter in its short history.