China-Europe Auto Symposium (II)

On Tuesday evening, September 22, I made the opening keynote to the China-Europe Auto Symposium. Following are the remarks I made to the assembled auto executives.

Good evening.

I’m honored to have been asked to speak to this very distinguished group of automotive executives. I just returned from the United States where we celebrated a number of happy occasions over the last several weeks, including the arrival of my new granddaughter. I have to admit that it was tougher than normal to leave, but I’m delighted to be here with you tonight.

As often happens on the long flights to and from China, I struck up a conversation with the man sitting next to me on the plane on Sunday. After telling each other what we each did, I mentioned that I’d be traveling to Shanghai when I arrived. “What are you going to do there?” he asked. When I told him that I’d be speaking at the China- Europe Auto Symposium, he looked quite surprised. “But I thought that you are an American,” he said. “I am,” I replied. “Then, why is an American speaking at a conference for Chinese and Europeans?” he asked.

It hadn’t seemed strange for me to be speaking at this Symposium until he put it that way, but I’ve been wondering ever since about the answer to that question. There are several possibilities. The obvious one is that the automotive industry, like all industries today, has become very international, so what difference does it make anyway? With American, European, Japanese and Korean car companies all in China, and Chinese and Indian companies buying automotive assets all over the world, why shouldn’t an American speak to a European and Chinese audience.

I suspect, though, that there is a more specific reason. The subject of this Symposium is market entry to Europe, and I can imagine that this must seem like quite a daunting challenge to many in this room. While all of you know China and the China automotive market very well, Europe is an entirely different matter. Europe and its markets must seem as strange to you, as China and its markets seemed to me when I made my first trip to this country in September, 1992. I suspect that the Symposium’s sponsors thought that some of the lessons I learned when I came to China might be useful to all of you as you contemplate going abroad.

When I made my first trip to China almost 20 years ago, I knew absolutely nothing about the country. I didn’t speak the language and I didn’t know any of the people. And when I decided to start an auto components company, I didn’t know anything about the automotive business.

In learning how to do business in China and building ASIMCO over the past fifteen years, I learned that there are three important steps to understanding a new country, a new market and a new culture.

The first is to identify any experts that can help you to learn about the country and the industry. Just like someone who has grown up, lived and worked in China will know more about this country than someone form the United States or Europe who travels here frequently, someone who has grown up, lived and worked in Europe will know more about European culture and business practices. In China, I was very fortunate to meet and learn from individuals like Dong Yang and organizations like his. At the Symposium, you will have an opportunity to meet and learn from experts from Europe in a broad range of subjects.

The second lesson I learned is the importance of personal investigation. No matter how much you can learn from the experts, it is very important for you to see things for yourself and to draw your own conclusions.

When I decided in January 1993 to look at the idea of forming a national components company in China, one of the first things I did was to begin visiting factories all over China so that I could see for myself what Chinese factories looked like and how they operated. I counted them up, and during the first nine months of 1993, I personally visited over 100 factories in 40 areas all over China. You name the city or province, and I was there. During that nine months, I ate every part of every animal—with the emphasis on every. And of course, I drank a lot of baijiu.

I had never had baijiu before I came to China, but I soon learned how important it was to getting to know your potential Chinese partner and to doing business in the country. Because we might be bringing capital to their city or factory, every mayor or general manager we met wanted to show us a good time. They felt, it seemed, that the more we drank, the better time we would have, and the more money we would bring. Therefore, our hosts would do everything they could to have us drink a lot.

One of our lunches in Sichuan Province still sticks in my mind today. As I normally did at the lunches and dinners we had on these trips, I gave my “Capital, Management, and Technology” speech where I described the kinds of resources that I could bring to their factory. I had just launched into this speech when I felt a tap on my shoulder. I turned only to see one of the waitresses with a glass of baijiu in her hand, offering to ganbei with me. Ever the gentleman, I responded by saying, “I never refuse to drink with a beautiful woman,” and we drank.

It was a fatal mistake. I sat down, resumed my speech, and about five minutes later, felt another tap on my shoulder. Another waitress, another glass of baijiu, and another offer of ganbei. How could I refuse after drinking with the first? If I did, wouldn’t she think I was trying to tell her that she wasn’t beautiful too? Down it went.

I sat down and resumed my speech yet again, though this time admittedly a bit more slowly. When I received the next tap only minutes later, I knew that when I turned around I’d see yet another waitress with yet another glass of baijiu and another offer to ganbei. What I didn’t expect to see when I happened to glance toward the entrance to the kitchen, were seven more waitresses lined up, all patiently waiting their turn! The general manager had found a very effective way to have me drink a lot.

During this nine months, I learned a lot about the Chinese auto industry. I also learned, however, a great deal about China, its people and its culture. The lessons I learned on that trip still stick with me today.

The third and final lesson that I learned is the importance of building, trusting and empowering a strong local management team. Once we got started building our company, one of the things I paid the most attention to was building our local management team. Only by doing this, I felt, could we be assured of having any long term success in China.

As you begin sales and marketing activities or operations in Europe, I would encourage you to do the same. Should you go to Europe, your long term success will depend upon how good a job you do building, trusting and empowering a strong European management team.

When all of us look back 20 years from now, I am sure that we are going to say that 2009 was the year in which the center of gravity in the global automotive industry shifted to China. Due to the global economic crisis, many of the past global leaders are experiencing very difficult challenges in their home markets. At the same time, China’s auto market continues to grow, causing China to surpass the United States and become the world’s largest auto market. Chinese companies are shopping for automotive assets all over the world and are taking advantage of this once in a lifetime opportunity to acquire technology. And, good Chinese companies are preparing to take their products to other markets, as evidenced by the attendance at this Symposium.

While everyone realizes that the auto industry is difficult, the future has never been brighter for Chinese companies in this industry. I wish you all the best with your plans for Europe. Thank you.

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