IN THIS SUMMARY Michael Dunne is an American businessman with over 20 years of experience working in China in the automotive industry, initially as an industry consultant and more recently as an investment advisor. In American Wheels, Chinese Roads, he puts his experience to work, telling the story of General Motors’ early years in China. He explains the rules of the road for doing business in China, providing colorful examples and anecdotes from Chrysler Jeep as well as GM. Dunne describes the importance of luck and licenses, the central role of joint ventures, and the enormous power of China’s city governments, which function almost like sovereign countries. SUBSCRIBE TODAY http://www.bizsum.com/summaries/american-wheels-chinese-roads

2. AMERICAN WHEELS CHINESE ROADS
The Story of General Motors in China
AUTHOR: Michael J. Dunne
PUBLISHER: John Wiley & Sons, Inc.
DATE OF PUBLICATION: 2011
218 pages

3. FEATURES OF THE BOOK
American Wheels Chinese Roads By Michael J. Dunne
American Wheels, Chinese Roads has widespread appeal.
The author writes in an engaging style, painting vivid images
and often building suspense from one chapter to the next.
Both entertaining and educational, the book is not only a
description of General Motor’s entry into China but also an
excellent introduction to the ways of doing business in China
in general.

4. THE BIG IDEA
American Wheels Chinese Roads By Michael J. Dunne
• License: China requires a license for most business
activities.
• Joint venture: All foreign companies making cars in
China must do so in a joint venture with a Chinese
partner. The Chinese partner must have at least 50
percent equity.
• Chinese capitalism: China’s economy has been
described as partly a command economy and partly
unfettered capitalism.
• City government: The central government of China
has allowed substantial power to devolve to city
governments which compete with one another…

5. INTRODUCTION
American Wheels Chinese Roads By Michael J. Dunne
Michael Dunne is an American businessman with over 20 years
of experience working in China in the automotive industry,
initially as an industry consultant and more recently as an
investment advisor.

6. DEVELOPING THE OPPORTUNITY
American Wheels Chinese Roads By Michael J. Dunne
In the summer of 2010, the producers of 60 Minutes wanted to
do a story about how General Motors had managed to thrive in
China while the rest of the company had entered into
bankruptcy. It would have been a good story, but GM executives
refused. Viewers would have learned that every business
initiative in China begins with a license, that to get a license in
the car industry you must have a Chinese partner, and that these
Chinese partners are usually a major municipality or even the
central government itself. In addition, viewers would have
learned that there are more car brands produced in China today
than in any other market in the world, including the United
States.

7. DEVELOPING THE OPPORTUNITY
American Wheels Chinese Roads By Michael J. Dunne
Many Detroits
The Chinese economy is notable for the extent to which central
government planners have allowed economic and political power
to devolve to the cities, particularly when it comes to the
automotive industry. City governments have become major
centers of economic power. The country actually has six major
“Detroits” and several minor ones, says Dunne, and there is
fierce competition among them. Car-building cities act almost
like sovereign countries, seeking to “export” their cars to other
cities, and trying to restrict local buyers to buying locally.

8. DEVELOPING THE OPPORTUNITY
American Wheels Chinese Roads By Michael J. Dunne
The Kit Price
GM made its first foray into the Chinese car market in 1992. It
was a decidedly unsuccessful joint venture to build S-10 pickup
trucks in the rather poor city of Shenyang. The S-10 was the
wrong product at the wrong time. Chinese workers could not
afford the relatively expensive truck and did not actually even
need it. It was especially too expensive for buyers in Shenyang,
and the buy-local mandate kept away potential buyers in other
cities.

9. NEGOTIATING AND SIGNING THE DEAL
American Wheels Chinese Roads By Michael J. Dunne
With the partnership now official, negotiations turned to
developing a business plan and dividing up the money of the
new joint venture, Shanghai GM. The two partners in a 50/50
automotive joint venture, as was Shanghai GM, are equal, and
yet they are not. Coming between them is the “kit price,” the
price that the joint venture pays to the U.S. partner for the
“knock-down kit,” the set of car parts made in a U.S. factory and
shipped to China for assembly. All other money is divided up
according to the equity shares, but any profit on the kits—any
excess of what the joint venture pays above the cost of
producing the kit—is exclusively the U.S. partner’s profit. GM
would thus favor a higher kit price, while SAIC would prefer to
keep the price down.

10. MAKING THE “RIGHT” CAR FOR CHINESE
MARKETS
American Wheels Chinese Roads By Michael J. Dunne
By the time the Buick Century was launched in late 1998,
Shanghai GM faced competition not only from the Passat but
also from the Honda Accord, which was being produced at a
factory Honda had acquired earlier in 1998 when a Peugeot joint
venture filed for bankruptcy. Aided by government orders,
Shanghai GM sold 20,000 Buicks in 1999 and 30,000 in 2000,
but the Buick was being dramatically outsold by the Accord and
the Passat. It appeared that Chinese buyers loved the prestige
of the Buick but viewed it as a gas guzzler. Its 3-liter, V-6 engine
could not compete for gas mileage with the 2-liter, 4-cylinder
Passat and Accord. Acceleration and passing power did not
matter as much to Chinese drivers as gas consumption.

11. FAST GROWTH AND ABRUPT CHANGE
American Wheels Chinese Roads By Michael J. Dunne
The next few years saw amazing growth. The Chinese car
market soared from 3.6 million sales in 2005 to 10.5 million in
2009, surpassing the United States as the world’s largest car
market. Some 90 percent of sales still settled in cash. With the
Buick, Chevrolet, and Cadillac brands doing well, Kevin Wale
focused on SAIC-GM-Wuling, a joint venture established by
SAIC and GM in southern China in 2002 to build micro vans and
micro trucks. Small cars and trucks, powered by engines
comparable to U.S. motorcycle engines, were being used to
transport people and goods all over the Chinese countryside. It
was a promising new market for GM.

12. THE END OF THE BEGINNING
American Wheels Chinese Roads By Michael J. Dunne
What happens next in China’s automotive industry, and what
does the future hold for GM in China? China has always been
open about its automotive strategy: partner up with foreign
companies, absorb the technology, and then make cars on its
own. Thus far, China has built the partnerships, but the
partnerships have mainly produced and sold already-designed
cars from Japan, Europe, America, and Korea. The large profits
China has earned in so doing—and sizable salaries of some
employees—may have encouraged the Chinese to stop at this
step. In addition, foreign partners have been reluctant to cede
technology.

13. THE END OF THE BEGINNING
American Wheels Chinese Roads By Michael J. Dunne
The road to survival and success in China is arduous and long,
Dunne reminds us, and it still begins with a license and a
partner. Once a company has these, it is still competing with
both the house and the player—the ones making the rules are
also playing the game.

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American Wheels Chinese Roads By Michael J. Dunne
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