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Feeling Chery?Finally, the Chinese invasion begins! Are you feeling a bit Chery? This week, Chrysler chief exec Tom LaSorda announced a big contract to sell Chery automobiles in America. And 75 American dealers have already signed up. What’s so interesting about that? Because for the first time, Communist Chinese cars will be trolling your streets, fishing for American dollars. Okay, you're perked. But China already helps make WalMart the biggest company in America. So what’s the big deal? Well, in terms of money it’s pretty big. But the story behind Chery is immense. Intriguing. Wait, make that absolutely nuts. First, Chery is actually an accidental mistranslation of the word “Cheery.” But they kept it anyway. Except they won’t call it “Chery” in America, because it sounds too much like “Cherry,” which sounds sorta like “Chevy.” Not good for a Chrysler product. Back to our story. Chery started as a little Chinese auto manufacturer only nine years ago. They bought $25 million of old equipment from Ford, licensed a chassis from Volkswagen, and in true Chinese tradition, proceeded to pirate car designs from Ford, Chevy and Daewoo. Then, they got serious, and decided to expand. A lot. Chery hired a Mitsubishi engineer, adopted old GE hot shot Jack Welsh’s Six Sigma management system, hooked up with Malcolm Bricklin, added Ferrari’s Bertone and Pininfarina designers, had their engines made from Austria’s AVL, partnered with Germany’s Bosch transmissions, and Britain’s TRW parts and Lotus chassis engineering. You follow that? Well, it worked. In 2000, Chery sold about 2,000 cars. By 2006, they cranked out 300,000. When they enter the American market in 2009, Chery expects to quadruple that figure. Of course, cobbling an automobile from eight countries sounds like a victory for the global economy. But global manufacturing makes strange bedfellows. Chery has plants in China, Malaysia, Egypt, Urugway, Pakistan, and (drum roll, please)…Iran! And their first export? Syria. It sounds kinda nuts. We are using a communist country to lure 13th Century cultures into the capitalist world, yet simultaneously supporting enemies as they plot to destroy us. But there’s more. Chery makes small cars at an incredible price. But Chrysler is only distributing Chery. They are not manufacturing anything. That is significant because despite slumping sales and idle plants, Chrysler is entirely bypassing their existing operations and simply importing and distributing the entire Chery brochure. It appears Chrysler is changing from manufacturer to distributor. For Chrysler, that is a big deal. But for the United Auto Workers, it's life and death. The UAW was preparing to strike Chrysler to regain previous concessions to Ford and Chevy. After Chrysler posted a $1.5 billion loss, union officials backed off a bit. The Chery deal is an unmistakable second warning shot. Historically, imports have made significant progress. In the 70s, Japanese autos infiltrated the American market by offering great gas mileage and a lower price. Eventually, their superior reliability commanded a higher price than American cars. Then, Koreans (Daewoo, Kia, Hyundai) came along and offered reliable cars, and sold them for even less. Now, Chinese Chery will enter the American market with even cheaper cars. But notably unlike most imports, Chery won't create any American manufacturing sites. This time, Chrysler will serve as a mere distributor. Period. This looks remarkably like the WalMart-ization of the U.S.auto industry. For the moment, let’s ignore the debate over economics, worker displacement, etc. After all, the giant sucking sound of outsourced jobs has created record low unemployment, the best stock market in history, all-time record personal wealth ($52 trillion!!!), no inflation and low interest rates. The more interesting story is the twisty-turny tale of Chery and the global auto industry. The United States of America is perched at the dawn of the 21st Century, the world’s sole super-power, a capitalist nation importing autos from communist China, who gets parts and designs from eight nations in Europe and Asia, manufactured in at least 6 nations in South America, Asia and the Middle East, some who vow to destroy America, although two of them sell us oil. Chrysler is theoretically sacrificing American manufacturing jobs by choosing distribution over manufacturing, even as our unemployment rate drops to historic lows and wealth creation to all-time highs. Oh, yeah, and Chery still doesn’t even have an American name. And it all started when a little Chinese company bought some used equipment from Ford. Sheesh. Makes you want to watch TV. Wanna hear the story about how that got to your living room?
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