SHANGHAI -- Shanghai Automotive Industry Corp. wants to break out of its roots in China and become a global automaker.
But so far, its ambition has exceeded its abilities.
Take Wang Xiaoqiu, 42, the executive leading the effort to develop
SAIC's own brand. He spent 14 years working on quality control at Volkswagen AG's joint venture with SAIC. He knows international standards.
But Wang also never has lived outside China, so his knowledge of other car cultures is limited. And even if he is a fast learner, Wang is still only one man.
"SAIC's culture has been a sort of holding company, letting the joint ventures do all the dirty work of making cars," says Ashvin Chotai, director of Asian automotive industry research for Global Insight in London. "Does SAIC have the technical and managerial resources to make it all happen?"
SAIC aims to sell more than 3 million cars worldwide by 2020. In 2005, it sold close to 1 million through its joint ventures, nearly all in China. By 2010, it plans to assemble 200,000 of its own brand cars and export 50,000. It will continue to partner with Volkswagen and General Motors as well.
Management depth is a problem for SAIC. The parent company is a state-owned enterprise that started as a tractor manufacturer. It assembled its own Shanghai brand car for several decades starting in the 1950s.
But SAIC's only experience with today's market - where cars are filled with complex electronics and buyers demand top-quality interiors - is through its joint ventures with Volkswagen and GM.
All the top management at SAIC Motors Manufacturing Co., of which Wang is a general manager, is drawn from either Shanghai Volkswagen or Shanghai GM.
And although SAIC could continue to harvest management there, that would dilute the joint ventures' management talent. That could reduce the crucial income they bring in to fund SAIC's own brand effort.
The lack of experience has resulted in some managerial missteps.
SAIC's purchase of MG Rover floundered after another Chinese company, Nanjing Automobile Corp., became the surprise winner of a bidding war for MG Rover's manufacturing equipment in 2005. SAIC was left with the intellectual property rights to two Rover models, which are the basis for SAIC's own models.
SAIC paid $500 million for 48.9 percent of failing Korean automaker Ssangyong Motor Co. in January 2005, then spent $120 million to buy an additional 2 percent so it could have more than 50 percent ownership, says an industry source familiar with the deal. For comparison, SAIC invested $350 million for half of thriving Shanghai General Motors in 1995.
Now, the Ssangyong purchase is languishing after the Chinese government refused to approve a joint venture to manufacture an SUV based on a Ssangyong design.
SAIC's government ownership is proving to be a burden. The Shanghai city government, SAIC's owner, is pressuring the automaker to quickly come out with its own brand, using technology it develops itself. The central government is pressuring SAIC to develop alternative-fuel vehicles. The company must try to meet both demands with its limited management.
So, besides aiming to sell 200,000 of its own brand car by 2010, SAIC also plans to produce 10,000 vehicles with hydrogen-fuel-cell or hybrid engines.
The government demands on SAIC are one reason why some analysts say that two smaller, more nimble Chinese automakers - Chery Automobile Co. and Geely Automobile Co. - have better chances of developing globally competitive cars.
To be sure, SAIC has its strengths. Foreign automakers and suppliers that have worked with SAIC rate its management highly. It also has two decades of joint-venture experience.
But as Global Insight's Chotai points out: "Developing your own technology takes many years. SAIC is trying to figure out how to accelerate that by using a mishmash of technologies to do this."
And out of that mishmash, SAIC must come up with a globally competitive brand.
You may e-mail Alysha Webb at [email protected]