US automaker's 'long march' for joint venture with China
''The beauty of China,'' says Ronald Gilchrist of American Motors Corporation , ''is that it is an excellent export base, but also has a very, very attractive domestic market with tremendous potential.''Skip to next paragraph
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Sounds like a great opportunity for any United States company. But it takes time and patience to strike a deal with a country not used to capitalist business practices.
In AMC's case, it took four years. But in the process ''we learned a lot,'' Mr. Gilchrist recalls at AMC headquarters here.
Gilchrist, who looks somewhat boyish with his red cheeks and light hair, is manager of the company's Far East operations.
Last month, in Peking's Great Hall of the People and in the midst of much ceremony and honor, AMC officials signed a joint-venture contract with Beijing Automotive Works. AMC is putting $8 million in cash and $8 million worth of technology into the joint venture, which will make it one-third owner of Beijing Jeep Corporation, the new name for the operation. AMC will now provide components to upgrade a four-wheel-drive vehicle already being manufactured at the Peking plant. Later, Beijing Jeep will manufacture a version of the AMC Jeep. Production is scheduled for 20,000 vehicles a year.
For AMC the four years - one of them a waiting period while China reorganized its ministerial structure - were full of surprises.
''The areas where we expected traditionally to have the biggest problems went surprisingly smoothly,'' adds Tod Clare, vice-president for international operations. ''The areas where we expected almost a routine treatment turned out to be rather difficult ones.'' The AMC executives tick off a couple of contract clauses that are standard in ventures like this one, such as for force majeure (floods, earthquakes, or unusual economic conditions, etc., that make it impossible to live up to a contract) and arbitration. ''With the Chinese, we spent a lot of time talking about clauses that are standard everyplace. Arbitration was a big, big issue - in terms of what steps you go through.
''When you get the first two-thirds of a contract done, the last third is usually simple. In this case we never knew where we were going to come across a major issue,'' comments Mr. Gilchrist.
AMC had also entered the negotiations with a rough contract outline, drawn from other joint ventures. But the US executives found that the more they pursued their outline, the more difficult negotiations became.
''The Chinese were having a terrible time going to our format,'' Gilchrist recounts. ''The first breakthrough we made was when we threw (our outline) away and started going with their format. We tried to introduce our ideas within their format and we stopped trying to force our own outline . . . .''
Another sticky point: trademarks. Mr. Clare explained that Chinese use the word ''jeep'' generically - just as many Americans use the word ''xerox'' to describe photocopying. ''We were very, very protective of the Jeep trademark . . . . The Chinese had a difficult time understanding what the issue was,'' he explains. It took almost three years to register the Jeep trademark in China.