General Motors' China hand

Ward's Auto World Senior Editor Greg Gardner interviewed Rudolph A. Schlais Jr., president of General Motors China operations, during June's Auto China '96 show in Beijing. Here is a transcript of that interview.

Q -- Where do things stand with the joint venture with Shanghai Automotive Industry Corp.?

A -- We were selected as the partner of choice in October. We've been actively working with SAIC on a pre-feasibility study and our project is going through the central government for project registration.

Project registration was submitted at the end of last year and is working its way through the ministries.

All the indications we have to date are that the reviews are favorable.

Q -- But you don't know how long that process will take?

A -- This is a large project that requires a lot of Chinese understanding and scrutiny because it is a major chunk of their investment. This is THE vehicle project in the Ninth 5-Year plan.

Q -- Before it was announced that you would do this project there was a lot of talk that you were interested in both a midsize car and a van. What happened with the van?

A -- The project was redefined. This is a centrally planned sector. You don't just walk in and say, "Why don't we build this?" They make a decision as to what is the central planning point or the proper market segment to work on, and you respond with projects that respond to that plan. That's what we've done.

Q -- Is there any interest in the government in going ahead with that vantype vehicle?

A -- I can't answer that right now. What we're working on with the partner right now is a mid-high sedan. Obviously the market is an institutional buyer market, state-owned enterprises and wholly-owned foreign enterprises. This particular vehicle is aimed at an import market that is an upper-level segment (Toyota Camry, Lexus ES 300, BMW 3 and 5 series, Mercedes C and E classes) that happen to be vehicles that continue to be imported to China -- even with the high duties -- so even though the total volume of imported cars is down, those are still coming in. This is an opportunity for the Chinese to have a domestically produced vehicle of that quality and technology level.

"The vehicle we are focusing on is not yet sold in the United States. It has basically the latest technology level in safety and emissions, ride and comfort, and it will be a Chinese-specific vehicle.

Q -- Why are you showing the Buick Century at Auto China '96? How close is that to the car you will build here?

A -- We're showing the Century as a mid-high, high-technology vehicle. If you recall, we made a comment in the announcement that the brand name would be Buick. All we're talking about here is subject to a joint-venture partner agreement. There are still negotiations that are under way. Until final approval is given, nothing is final.

Q -- If this is THE vehicle project of the Ninth Five-Year plan, where does the Family Car project stand? Is that for the next Five-Year Plan?

A -- Since the time of the Family Car show in November 1994 the definition of a family car in China has become considerably more flexible. It isn't a size vehicle, it is a series of vehicles primarily focused on a cost-base that would allow a private person to be able to procure one. They have used the number $7,000 US. In the next 5 years, the dominance of sales will still be institutional buyers.

Q -- GM Chairman Jack Smith has been very outspoken about renewing MFN (Most Favored Nation status) for China and warning against sanctions prior to the recent agreement between the U.S. and China on protection of intellectual property rights. Has the sometimes-tense tone of those discussions hurt GM's efforts in China? Has it delayed the GM-SAIC venture?

A -- If you look at who's being denied MFN, it's basically rogue countries. China is not a rogue country by any stretch of the imagination. It is a major trading economy, and the ritual we've gone through has caused major disruptions for the businesses that are attempting to establish in China. And our European partners have well taken advantage of that opportunity. We're proposing very strongly that there be unrestricted MFN and that there be a process for granting permanent MFN status for China.

There have been major tensions. Not from the standpoint of working with our partners, not from the standpoint of interfaces with the government, but politically. The uncertainty has caused some major hesitancy on both sides. It's just not a good situation.

Q -- How soon will you decide on a new product for the joint venture with First Auto Works in Shenyang?

A -- The study's under way. It's imminent. We have a proposal in hand. The partner is examining it. We're looking at what it takes to implement it. These are ongoing discussions. The license is for a light truck. We're just trying to make sure we've got a vehicle that the market demands and at a cost level and localization level that will meet the requirements of customers in China.

Q -- Speculation is that it will be the Blazer. Is that accurate?

A -- Obviously Blazer is a variant of a light truck. It probably will be a couple of vehicles.