Chery group matures into global auto player

Updated: 2007-09-24 09:22

WUHU, China  - China's Chery Auto sales vice president Jin Yibo remembers when the roof in the president's office had a leak so big that they had to put out buckets to collect the water.

"Those were tough times," said Jin, shaking his head in disbelief as he recalled Chery's humble beginnings 10 years ago.

It was March 1997, and the firm based in Anhui, one of China's poorest rural provinces, had been established with 1.7 billion yuan (225 million dollars) of government money but had never turned out a car.

"There was nothing here, this was just fields," said Lucas Biagini, chief executive of Italian parts supplier Magneti Marelli that now earns about 30 percent of its China sales from the upstart Chinese group.

The plant's spectacular expansion reflects how Chery has successfully grown from "young boys into mature people," Biagini said.

With little industrialisation to speak of, the provincial government quixotically cast its fortunes in with the auto industry, betting that China's 1.3 billion people would soon have enough money to buy their own set of wheels.

"The decision was correct," Chery vice president Zhou Biren told Western journalists invited to tour its ultra-modern headquarters in eastern China for the first time.

Chery's home in the Yangtze river port city of Wuhu is today a massive industrial park, housing not only the company's vast high-tech plants, but major American, European and Japanese auto engineering firms.

The proximity of its overseas suppliers such as Visteon, Bosch and Siemens has been critical to the rapid growth of a firm that recognised from the start its ambitions had to be built on the back of foreign technology.

"We have received a lot of help from foreign companies, said Lei Gu, a Ford trained engineer, who is one of 70 key engineers that has worked overseas for global manufacturers.

Inside the plant hums with the best German, American and Italian machinery money can buy as busy workers set about the complex assembly and testing that allow Chery to produce 400,000 independent-branded cars and engines a year.

"We spent a lot of money to bring in the best technology," said Zhao Baoming, vice general manager of Chery's engine group.

Chery saw its millionth car roll off the assembly line last month, a milestone in its rapid expansion that the firm said took six years to make the first half million cars and only one and a half for the second.

It expects to add another 250,000-300,000 units after a new plant starts operation in October and aims to double exports in 2007 from last year to 100,000 cars, as the firm races towards its target of selling one million cars annually by 2010.

"Independence, Strength, Innovation, Pioneering," reads a banner hanging at the plant that serves as a reminder of Chery president Ying Tongyao's lofty goals, which include building luxury cars under a new brand name by 2009.

Ying, who has piloted the firm through its ups and downs, including a nasty intellectual property rights dispute which was settled out of court after General Motors accused the firm of copying one of its sub-compact models, pulled off a major coup with Chrysler in July.

The firms inked a 25-year deal for Chery to build its inexpensive A-1, a 1.3-litre engine hatchback, for the iconic but troubled American firm under its Dodge brand.

Chery had previously planned to exports its brand-name cars to the United States, but the deal with auto retailing entrepreneur Malcolm Bricklin was aborted in late 2006.

Vice president Zhou refused to go into details behind the collapsed agreement, but said that Bricklin's Visionary Vehicles group has not been the "appropriate" firm for Chery.

Nevertheless he acknowledged that Chery was not ready to enter the cutthroat American or European markets under its own brand, where rigorous safety and quality standards continue to pose challenges for China's young car firms.

"We have to prepare our products, our distribution network, when all these things are ready then we will go to these markets," said Zhou, declining to provide an entry date.

Chinese cars have failed Western safety tests in the past and in June it was Chery that found itself at the centre of global scrutiny when one of its sedans failed a crash test conducted by a Russian auto magazine.

Chery executives reportedly said that the test had been biased and that the car performed much better in later tests in China, but by then filmed footage posted on YouTube was the latest hit on the Internet video site.

Chery executives here insisted that they are employing cutting edge systems to ensure safety and quality of their cars, and say that the days of shoddy Chinese goods are over.

"The quality of Chinese car is exaggerated by some foreign media. We're confident about our future," Zhou said.

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