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American firms opening doors for China

Scott Tong Jul 7, 2008

American firms opening doors for China

Scott Tong Jul 7, 2008


KAI RYSSDAL: There just might be a silver lining in the General Motors news we were telling you about earlier — that GM’s contemplating more layoffs and shutting down some of its production lines. The good news for the Rust Belt comes in the form of investment from a country more often seen as a competitor than a friend. Our China correspondent Scott Tong took a side trip to Ypsilanti, Mich.

SCOTT TONG: When the Big Three automakers start ailing, the entire supply chain gets infected.

Slumping sales have hit companies like American Broach and Machine in Ypsilanti. The company makes metal-cutting equipment for transmission and brake parts, and it’s been in Brad Kokmeyer’s family for decades.

Brad Kokmeyer: We were focusing on the U.S. market a little bit too much in the automotive. And as orders weren’t coming in, we were kind of just scratching our heads, looking “Where’s our next order going to come from?”

Enter Qin Chuan, a machine tool company from middle-of-nowhere China. A few years back, Qin Chuan bought 60 percent of American Broach, keeping it afloat and ponying up for Kokmeyer’s new factory.

Kokmeyer: This is a gear grinder that was manufactured by our partner company in China. It was on their floor about four, five months ago.

In the auto-supply sector, only a few Chinese firms have bought American counterparts. For now. A lot of observers see a wave of merger activity about to hit the shores of the industrial Midwest.

Francis Bassolino: Basically, what’s in it for the U.S. companies is survival.

Supply chain consultant Francis Bassolino is with the firm Alaris.

Bassolino: If you don’t have a manufacturing platform in China, you are more than likely on a path to extinction.

If the motivation for struggling U.S. firms is obvious, what’s in it for the Chinese buyers? For one, American know-how — innovation. That’s hard to come by in China, where the mean joke is that R & D stands for “receive and duplicate.” The more grown-up term is “reverse engineering.”

Mingan Tan of the Detroit-Chinese Business Association explains.

Mingan Tan: Basically, you have something existing. More or less you copy it in a way without fully understanding. Just take it and assume it will work.

Tan gets lots of calls from Chinese auto companies, looking for distressed Michigan assets to buy. The other thing they’re after is access to the American market — i.e. the Rolodex of Ypsilanti businessman Brad Kokmeyer.

Brad Kokmeyer: We had very good connections at General Motors, Ford, Chrysler, John Deere, Caterpillar. So we were able to get them into factories that they normally wouldn’t be able to get into and at least introduce their products.

It’s a marriage of economic convenience. And matchmakers in the form of American lawyers, and investment bankers and private equity funds are all trying to arrange more. But can the corporate newlyweds live together?

MOVIE CHARACTER — JAPANESE BOSS: Mr. Stevenson, how do you think things are going at the factory?

The 1986 film “Gung Ho,” starring Michael Keaton, provides a bad-case scenario. It captures the corporate culture clash between a Pennsylvania factory manager and his new Japanese bosses.

Michael Keaton: See, you’re stateside now fellas. And to tell the truth, you’re still acting like a bunch of Yokohama mamas. No offense.

Japanese boss: I do not understand American workers. They come five minutes late, leave two minutes early. They stay home when they are sick. They put themselves above company.

Growing pains aside, China may be the new Japan Inc., as far as investing in America. And here in autoland, Chinese buyers and American sellers wonder if joining forces will be a viable crossover vehicle in the global economy.

In Ypsilanti, Mich., I’m Scott Tong for Marketplace.

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