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The Chinese Auto Industry

I won't comment on this much, because I'm not an expert on the Chinese auto industry (I still buy U.S.-built cars). But The Great Race: China offers big challenges but huge opportunities offers a primer on the ins and outs of cars and trucks in China. It's written by my good friend Austin Weber, Senior Editor at Assembly Magazine, for which I write the Leading Lean column. If you're looking for a quick study on what's going on in this booming place, this is probably the article you should read.

I'd add a quick story: many years ago at Chrysler, before the “merger of equals” with Daimler, Chrysler was working with the Chinese government on building minivans in China. Everything was set and the big dogs headed over for the signing ceremony. At the last minute, the dumb-like-a-fox Chinese threw in another condition – worldwide distribution rights for the minivan, which meant Chrysler would be going head-to-head. The deal was almost so far along, it was hard to pull out, but there was really no choice. You can't give away all of your designs and rights just to participate in a small market.

Now, many years later, the Chinese market is no longer small, although only after years of promises of imminent explosion. A couple things strike me about the current situation.

1. The market is still dominated by imported designs – VWs and Buicks. But, each of the major Chinese players are in the heart of product development of their own products. Clearly, this must first gain traction inside the Chinese market. But, just as the South Koreans gained ground in North America faster than Japan did, China is likely to shorten that indoctrination time as well.

2. Imports are facing more and more daunting challenges, starting with a 25% tariff. GM has decided to stop building Cadillacs, despite China's growing wealthy class. Furthermore, due to new government rules designed to restrain a potential capacity glut, some auto makers may end up turning over their tools and designs. The risks for control are still very severe.

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3. Perhaps the biggest winners are not OEMs but Tier 1 and 2 suppliers. The Chinese still need technology, particularly if they ever want to sell to the U.S. they will need things like emissions and safety technology that they are not likely to develop themselves. In the past few months, BorgWarner, Key Safety Systems, Trico Products and Visteon (all Michigan-based companies) opened plants there. And ABB moved the HQ of its robotics division from Detroit to Shanghai, a huge signal in the shifting of the center of gravity.

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Jamie Flinchbaugh is a lean advisor, speaker, and author. In addition to co-founding the Lean Learning Center, he has helped build nearly 20 companies as either a co-founder, board member, advisor, or angel investor. These companies range from high-performance motorcycles to SaaS tools for continuous improvement. He has advised over 300 companies around the world in lean transformation, including Intel, Harley-Davidson, Crayola, BMW, and Amazon. Jamie co-authored the popular book The Hitchhiker’s Guide to Lean, and continues to share his experiences as a Contributing Editor forIndustryWeek and as a blogger at JamieFlinchbaugh.com. He holds degrees from Lehigh University, University of Michigan, and MIT, and continues to teach and mentor on campus. Jamie is best known for helping to transform how we think about lean from a tools-centric model to one based on principles and behaviors. His passion for lean transformation comes from seeking to unlock the great potential that people possess to build inspiring organizations.

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