China drives for place in U.S. car market

ZX Auto's Landmark SUV

TEXT OF STORY

Tess Vigeland: Could the "Made In China" label soon appear on a car lot near you? Technically no, but a car made in China just might.

Tomorrow, Chrysler is expected to finalize a deal with the Chinese automaker Chery. That would presumably lead to the first Chinese-made vehicles being exported to the U.S. under the Chrysler brand.

But you may not have to wait for that to happen. Another Chinese manufacturer has teamed up with an American company to assemble Chinese vehicles in Mexico and then import them here. From the Americas Desk at WLRN, Marketplace's Dan Grech has that story.


Dan Grech: Steve Saleen leads a small group of people through a maze of crates inside an industrial warehouse in Las Vegas.He stops at a circled-out section of floor where a truck and an SUV are parked.

Steve Saleen: Just imagine if you were in a parking lot at Wal-Mart. You could almost put any name plate on it and you would accept it as if it was from one of the top eight manufacturers around the world. It doesn't look like it's made in China.

The Grand Tiger truck and the Landmark SUV are made by China's Zhongxing Automobile, or ZX Auto. Saleen, a former race car driver, is CEO of the company's American subsidiary.

Saleen: There's an unbelievable amount of car here for the price. It really is amazing that you can purchase something like this, this complete, this refined, and drives as well as it does for $13,000. I just . . . I'm

[using] a set of wheels costing that much.

One thing keeping the sticker price down is the vehicles will be assembled in Tijuana, then shipped into the U.S. Under NAFTA, the North American Free Trade Agreement, the vehicles can then enter the U.S. duty-free.

Critics of this strategy say the Mexican plant is a Trojan Horse — it essentially will allow Chinese vehicles to sneak across the border. CNN's Lou Dobbs recently railed against the plan during his evening broadcast.

Lou Dobbs: An attempt by communist China to circumvent U.S. trade laws, that will almost certainly cost American jobs and give up a portion of this nation's car market. A Chinese automaker exploiting a loophole in NAFTA. It's a move that will, of course, benefit Mexico and China, not the United States.

New Jersey-based China America Cooperative Automotive Inc., or Chamco, is bringing the vehicles into the country.

Bill Pollack is Chamco's CEO. He says his company's simply playing by the rules established by NAFTA.

Bill Pollack: There's no exceptions here. There's no loopholes here. There's no wiggle room. Whatever the rules are, we will follow them.

Peter Morici: It is a loophole to bring subsidized components into Mexico, transform them in Mexico and then bring them into the United States — and not face any consequences.

That's Professor Peter Morici with the University of Maryland. He says Chinese carmakers already benefit from government subsidies and an undervalued yuan.Now, they're exploiting NAFTA's fine print.

Manuel Rocha is with the Globis Group, a consulting firm. He says free trade can be a double-edged sword. NAFTA extended the life of U.S. carmakers by giving them access to cheap Mexican labor. Soon, the Chinese will take advantage of those same rules and beat Detroit at its own game.

Manuel Rocha: Whether it's steelmaking, whether it's textiles, if there are others in the world's economy that can do it cheaper, then really it doesn't make sense for us to continue being involved. Especially by protecting those industries which are no longer competitive with high tariffs or subsidies.

Back in the dusty warehouse in Las Vegas, dealers pour in from around the country to check out the Chinese models. The vehicles can't be test-driven in the U.S. That's because it'll be another year before they meet U.S safety standards.

The models in the warehouse were made for Chinese roads. They even have the mandatory fire extinguisher in the front seat. Still, some of the dealers present seemed impressed:

Dealer: This is a sharp truck.

Chamco Representative: It's a very sharp truck. They look, they feel, they drive like everything else. The difference is we cost 20 percent less.

Experts say Chinese vehicles will transform the U.S. car market in the coming decade.

Again, Peter Morici:

Morici: The advent of the Chinese could be enough to tip the scales and drive an American automaker out of business — and cause a major upheaval in the industrial Midwest like we have not seen in many decades.

Morici says that could be the real price of a $13,000 SUV.

I'm Dan Grech for Marketplace.

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