Chinese auto makers pick characters as their U.S. reps
As a cub reporter about 40 years ago, one of my first assignments was to interview a man who claimed he perfected the perpetual-motion machine. I sense the same thing about Chinese cars coming to America.
Not that they won't come. I'm certain they will. But like the perpetual motion machine, the bugs still are being worked out. My wonderment is rather about the type of characters in the U.S. that Chinese auto makers have so far embraced to clear the way, act as liaisons and set up retail networks.
Who are these American front men? OK, we know their names: David Shelburg of the Auto-Kam Auto Group; Malcolm Bricklin of Visionary Vehicles LLC; and those China America Cooperative Automotive Inc. (Chamco) rivals who, before crashing and burning, vied for control of the company.
Maybe the more appropriate question is: Why these particular guys?
Say what you want about alleged Chinese food product quality or questionable business ethics, the nation's manufacturing seems top-notch. Auto retailers visiting theAutomobiles Co. Ltd. plant in China a few years back came away duly impressed.
Chinese auto makers such as, Auto Group and Zhejiang Geely Holding Group Co. Ltd. are substantial companies, serving huge markets throughout Asia and elsewhere. If they were truly serious about bringing their vehicles to the U.S., one would think they have the ways and means to do that.
What they lack, or what they are holding back, is desire.
They've used people such as Bricklin and Shelburg to test the waters and create some degree of brand awareness. It all might have amounted to something for the Chinese auto makers and even their odd choice of importers had the world economy not tilted backwards in late 2008, ending the U.S. auto industry's winning streak.
Shelburg, 80, came to my attention a number of years ago, when his name surfaced in lawsuits surrounding an alleged failed Chinese vehicle-import deal.
He claims to have been active in pursuing Chinese franchises in the U.S. since the early 1990s and incorporated China Motor Corp. in 1992 in Scottsdale, AZ.
I interviewed him for the first time in 2005 when he supposedly was representing auto makers Geely, Great Wall Motor Co. Ltd. and Hebei Zhongxing Automobile Ltd., also known as ZX Auto China. He said he had 25 dealers lined up, with a goal of 100 dealers by 2007.
Now he says he is signing up dealers for Brillance through his Auto-Kam Automotive Group. “We're going great guns,” he told Ward's last year.
I like Shelburg. He's earnest, believes in himself and his mission. But a lot of what he told me when I interviewed him didn't hold up, and I reported on that.
He claimed to have Chinese vehicles in U.S. Environmental Protection Agency emissions testing. He didn't.
He claimed the vehicles he was importing had earned federal safety ratings. They hadn't. Checking showed they hadn't even been tested.
He claimed to have franchises sold and dealers lined up. I checked on that as well, and yes, he had dealers lined up. When I interviewed him again a couple of years later, he had made some progress. He was still sure of his product's prospects and future success.
A lawsuit against Shelburg and China Motors USA LLC was filed in 2008 by an Ohio dealer. It was then dropped but later re-filed. It was one of three such suits that year against three different import companies selling distributorships and franchise rights to sell Chinese vehicles.
Shelburg today sounds as upbeat as ever: “China's turn at the U.S. market will come in a big way, sooner rather than later.” But I wondered why the Chinese are still working with him.
His organization is lean. It's him, his son and his son's wife. He isn't as charismatic as Bricklin, but nor is he as quick to overpromise. Yet the two worked together to establish the Subaru brand in the U.S., before having a falling out decades ago.
Can anyone take Bricklin seriously anymore? He seems like the P.T. Barnum of the auto industry. After the deal with Chery fell through, his Visionary Vehicles has morphed, as has its founder who now promises alternative-fuel vehicles.
And Chamco and its subsidiary ZX Auto North America?
Both companies ceased operations in 2008 after a group set up its own company upon breaking away from Bill Pollack, who claimed to be Chamco's rightful CEO.
Chamco had claimed to have lined up 40 U.S. dealers to sell Chinese cars made by ZX Auto China. Chamco's end came when ZX terminated its contract.
The Chinese have acted like “amateurs” in trying to enter North America, claims marketing consultant Dennis Keene.
James Hossack, vice president and senior consultant with AutoPacific consulting firm, sees it differently.
“Typically, companies take the path of least resistance, and going through importers like these (i.e. Visionary Vehicles and China Motor) is a low cost, low resistance way to start off,” he says. “It may well be that these efforts through Bricklin and others were least-resistance approaches that didn't work out.”
It's likely the Chinese originally simply read the tea leaves, says analyst Bernard Swiecki, senior project manager for the Center for Automotive Research.
“They looked at a guy like Bricklin who knew the U.S. market well, and while he might have screwed up a time or two, he had successes, too,” says Swiecki. “And like Bricklin learned with the Yugo, the Chinese perhaps learned that a car with a low price, alone, isn't enough to be successful in this market.”
I long suspected that when the Chinese were ready, they'd simply sidestep guys like Bricklin and Shelburg. The industry's recent woes simply compressed their timeline.
Most U.S. dealers are reluctant to comment on the record about their experiences with the Chinese auto makers and their U.S. representatives.
But one dealer executive willing to talk is Chris Saraceno, vice president at the Kelly Auto Group in Pennsylvania. Kelly had looked with interest at Shelburg's offerings before attending his 2008 WebX presentation ofproduct offerings.
“The franchise looked great, and the promise was the vehicles would be here in six months,” Saraceno says. “But the presentation didn't feel right to us. It wasn't like a franchise discussion with a normal manufacturer. The process didn't feel normal to us.”
He also thought Shelburg and company were pressing too hard to close the deal and not showing enough interest in prospective franchisees.
“An established franchise wants to see working capital and your good reputation when you talk about an add point, not just whether you have money for the franchise,” Saraceno says.
The Kelly organization participated in a Visionary Vehicles presentation too, and likewise took a pass.
An executive with a background in franchise development was hired for a similar function by Visionary Vehicles, brought aboard about the time Bricklin had hiredNorth America Inc.'s former president Pierre Gagnon as Visionary's president and chief operating officer.
“I modeled the Visionary Vehicles dealer-development strategy after the Saturn model and talked to a leading firm to help us map out territories and geography for precisely defined primary market area,” says the executive, who asked not to be named.
But Bricklin wasn't interested, he says. “That was a red flag. It told me this was a guy who wanted to sign up dealers as fast as he could and not establish the right kind of foundation for a franchise.”
The executive left the organization shortly afterwards. Gagnon left, too, within six months of being brought aboard.
An Indiana dealer, who requested anonymity, was part of a small group of dealers visiting the Chery Automotive plant in China.
“We saw the Visionary Vehicles offering as an opportunity to be on the leading edge of what everyone believes will happen one day — Chinese vehicles in the U.S. market,” he says.
He was impressed with the Chery factory and the vehicles it produced.
“But Malcolm was full of sell, and the affair was a little odd,” he recalls. “He had his son following him around making a movie of him. It always seemed that what Malcolm told you was what you wanted to hear.”