Geely Narrows U.S. Headquarter Search, Set to Hire Initial Staff

Geely U.S.A. Inc., the upstart North American unit of China’s Geely Automobile Co., has narrowed its search for a headquarters’ site to the Detroit-area or southeastern U.S.

The Los Angeles area, where many Asian auto makers have North American headquarters, has been scratched, John Harmer, vice president and chief operating officer for Geely in the U.S., tells Ward’s.

Harmer says the auto maker is considering locations between Memphis and Atlanta, as it expects to have a port of entry in either Florida or Georgia. A decision on the port of entry location should come in the next 30-60 days.

Meanwhile, Harmer anticipates hiring eight employees in the next several months in preparation for its early 2009 entry into the market here.

All eight have “significant” previous auto industry experience, either working for the U.S. Big Three or, in the case of one person, Nissan North America Inc., he says.

“We have selected an initial group of eight people, who will be coming on board within the next 30-60 days as we try and decide how to function intelligently with people in diverse places,” Harmer says in reference to the current lack of a headquarters.

Three of the candidates have engineering backgrounds, including prior experience with meeting U.S. safety standards, he says. The others have experience in environmental, dealer development and setting up dealer networks.

Shufu Li, Geely chairman, has been very involved in the decision making for Geely U.S.A. and currently is in the U.S., Harmer says.

Geely CK sedan

He also says Geely has selected its Ningbao plant to be the sole source of vehicles for the U.S. market. The facility, one of four Geely vehicle-assembly plants in China, has a 40,000-unit annual capacity.

Harmer says the plant will receive a brick-and-mortar expansion, as Geely expects to sell 25,000 units in 2009, its first full year in the U.S. market, and 100,000 vehicles annually after five years.

“The chairman, when I met with him last week, looked me in the eye and said, ‘Are you sure?’ And I said, ‘Yes sir, I’m sure,’” Harmer says of accomplishing Geely’s U.S. goals.

Geely initially plans to export its small CK sedan, as well as the Beauty Leopard roadster, to the U.S. from China. The CK retail price will be $10,000, while dealers will pay about $7,500.

Harmer says the high markup is necessary to absorb warranty provisions, advertising and shipping costs. “We’re just leaving ourselves enough of a margin that we’re going to be able to function effectively,” he says of the $2,500 difference.

Geely’s target consumer will be low-income Americans. With that in mind, Harmer says he has been talking to U.S.-based suppliers about reducing the costs of their parts.

The CK model will boast more content from U.S.-based suppliers than the Chinese-market version because of the need to have U.S. Dept. of Transportation-certified components, Harmer says.

“We are very conscious of the fact a major factor for people buying this automobile will be its price,” he says. “Obviously, we’ll keep the prices as low as possible, but that is also impacting these discussions with the component suppliers. We don’t (want to) engineer ourselves right out of the market by putting in U.S.-made components that have higher costs.”

Harmer says as recently as last week he met with various suppliers to discuss how to make compatible components for the CK that meet U.S. regulations.

Geely has said it does not plan to sign up U.S. dealers for at least another year. However, Harmer says he has been traveling across the country, meeting with interested parties to gauge their willingness to invest in standalone facilities.

“We have not had any pushback on that,” he says. “They’re ready to do that.”

The company also is working with a retail consulting firm to devise a showroom design, one that is not too intimidating to buyers on budgets.

“(We want to) make sure we don’t have a situation where our potential customer comes in and looks around and says, ‘Hey, I don’t belong here. This is out of my league.’ A little bit analogous to showing up at the Paris opera house in overalls and jeans,” Harmer says.

Geely is planning to produce an infomercial this fall, in cooperation with a Detroit-based advertising and public relations firm, to promote the Chinese auto maker and quell any fears Americans might have about buying Chinese-made vehicles.

Harmer says the ad likely will begin airing early next year, 12 months in advance of the auto maker’s targeted U.S. on-sale date.

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