Technology Transfer between General Motors and Shanghai Automotive Industry Corporation 42002

Introduction For developing economies, technology transfer plays a critical role. Many Third World countries had been insisting on it as conditionality for allowing foreign investment. Inflows of modern technological know-how and innovations could greatly enhance domestic manufacturing processes and in the long-term, built a reliable industrial base capable of competing with big multinational companies in the global arena.

China stood to benefit much from technology transfer. It only has to look on its neighbor Japan and, to a considerable extent, even South Korea to realize it. The significance of this factor is further highlighted by the implementation of Chinai??s Five-Year Automotive Industry Plan, the following changes were to be made in their automotive industry: 1. Consolidation i?? from numerous manufacturers, the Chinese government wishes to consolidate these manufacturers to a few major industry players wholly owned by the government, or through joint-venture businesses that will allow the transfer of technology not only in terms of auto making only, but also the creation of businesses that will support the automotive industry, such as a new national roads project, cleaner air environment projects and other similar business entities (Gallagher, 2003).

2. Joint-venture businesses were seen as the best method for the transfer of technology with the end view of being able to manufacture world-class vehicles not only for consumption within China, but for export abroad as well (Gallagher, 2003). 3. The development of strategies for developing a Chinese national car industry, to include the social and intellectual development of its scientists and engineers (National Academies Press, 2003). 4. The development of strategies for sustainable growth and development due to the increase in motor vehicle usage in the coming years (National Academies Press, 2003).

This paper would like to inquire on the modalities of technology transfer that would transpire between US-based General Motors Corporation (GMC) and the Chinese governmenti??s industrial counterpart, Shanghai Automotive Industry Corporation Group (SAIC). It would try to define the clear advantages that Chinai??s red dragon economy could obtain from one of the worldi??s most reputed names in the transport industry. Accordingly, GMC had been showing keen interest in the Chinese investment opportunities- its abundant supply of cheap labor and huge market potentials. And this Sino attraction was no recent development, as China and GM had had relationships dating back eight decades ago. Just to show how great the company views China, GM, to date, is the biggest investor in the automobile sector.

From its factories in Shanghai, the company had been exporting its cars to other equally profitable East and Southeast Asian markets. SAIC is the biggest government-owned automotive manufacturing business entity in China today. The SAIC has engaged in joint-venture deals with noted automakers from abroad, namely, Volkswagen, Range Rover, and of late, General Motors. It is engaged in the manufacture of cars, tractors, motorcycles, trucks, buses, and auto parts as well.

Its other operations are in car leasing and financing. The SAIC presently has around 50 plants in the Shanghai area today (Bryant, 1998). In 2003, the sales growth of SAIC over its 2000 operations was a substantial 36.7%. General Motors and its China Operations General Motors is the worldi??s largest automobile manufacturer and the global industry sales leader since 1931. It was founded in 1908.

Today, GM employs around 320,000 employees worldwide. Manufacturing operations can be found in 32 countries all over the world. In 2004, GM sold approximately 9 million vehicles all over. Its global headquarters are located in Detroit, Michigan. So far there has been nothing but positive news for the automotive industry in China.

As of the year ending 2004, General Motors alone in China has reported a 27% increase in vehicle sales over the last year. A total of 492,000 vehicles were sold by GM China in 2004, and their market share has increased to a comfortable 9% in the same year. The prospects are still bright considering the size of the market in this country (GM Enjoys Record Year in China in 2004, 2005). In 1997, General Motors officially began its presence in China, with the launching of six joint-venture projects and 2 wholly-owned subsidiaries, all based in Shanghai.

Today, GM China employs 10,000 people in China. The four most prominent partnerships are: The first joint venture project is Shanghai GM, a 50-50 joint venture project with SAIC, which began operations in 1997. Its operations are confined to the manufacture of GMi??s Buick line and the production of engines and transmission assemblies as well. The second joint venture project is the SAIC-GM Wuling Automotive Company Limited which is partnership among GM, Wuling Automotive Company and SAIC. Its operations center mainly on the manufacture of Wuling trucks and minivans.

The third partnership is the Shanghai GM Dong-Yue Motors Company. Its operations are centered on the production of buses. The fourth main project is the Pan Asia Technical Automotive Center (PATAC), which is a 50-50 partnership between GM and SAIC. The PATAC is the agency responsible for automotive engineering services, mainly design, development and testing, as well as the validation of new components and vehicles. It is also heavily involved in auto interior and exterior design Its main achievement todate is the reengineering of the Buick Regal and the Excelle prior to their launch in China.

The PATAC has been ISO9001 certified . The PATAC was instrumental in the design, development, and testing of the i??Qilini??, an economy car launched in 1999 (Chinese Operations, 2005). Technology Transfer through Joint Venture Projects (GM-SAIC) The main avenue for technology transfer is the setting up of the joint ventures themselves. These partnerships allow for the flow of technology and knowledge from GM into the Chinese mainstream automotive industry. As for Shanghai GM, the subsidiary where almost all of the knowledge transfer takes place is the PATAC.

It currently has a workforce of 900 persons, and it is in this center where most of the experts from GM in the United States share their latest industry concepts with their Chinese counterparts. These American engineers are also deeply involved with the training and development of the Chinese engineers. Also, most of the Chinese engineers are sent to GM facilities abroad (Australia, the United States, and Germany) for further training. This foreign training of local engineers thus constitutes an element in the transfer of technology from General Motors to SAIC. The main area of technology transferred via the PATAC is in the area of knowledge in design. This is in line with the Chinesei?? governmenti??s overall objective of achieving competitiveness in the local automotive industry.

With the formation of Shanghai GM, the government of China got a license to use GMi??s technical know-how in the form of drawings, blueprints, mathematical data and computer files (PATAC, 2004). Therefore, the formation of a joint venture itself is already a form of technology transfer as the local partner now has access to the foreign partneri??s wealth of technology. The putting up of manufacturing centers by these joint ventures is already proof of this. Training of Local Engineers In the PATAC alone, as mentioned above, local engineers are sent to different GM facilities abroad to observe and absorb new technical knowledge with respect to automobile manufacturing. The PATAC is also host to International Service Personnel (ISP) from various GM facilities worldwide who also share their expertise with local engineers (PATAC, 2004).

Many American engineers have also been brought in by GM in Detroit to train their Chinese counterparts. For instance, Professor Daniel Bauer from the University of Michigan was brought in by GM in 1998 as a visiting professor to Shanghai Jiao Tong University, a GM-China research partner, as the head of the i??Training the Traineri?? program, specializing in Geometric Dimensioning and Tolerancing, in order also to certify GM China engineers in this aspect (Visiting Professors, 2003). Other General Motors China Undertakings As early as in 1997, just right after opening, GM Shanghai already presented technical seminars in all its Chinese subsidiaries that introduced electric vehicles and hybrid technology. This was done in order to lay the groundwork for the research and development of environment-friendly vehicles in China.

In October, 2000, GM Shanghai sponsored the 2000 Shanghai Clean Gasoline Environment Workshop. This project was done in order to inform the members of the automotive industry in China the latest developments with respect to clean car technology as well as clean fuels production. In 2002, GM China assisted in a project to help the Chinese government in the preparation of strategies towards sustainable development even with a huge upsurge in motor vehicle usage all over the country. The lead agent in the study was the Chinese Academy of Engineering (CAE) .

The study focused on looking at the future of the personal car in China. It also discussed future land use that may be needed as the decentralization of the major cities of the country would occur as a result of the increase in mobility. The problem of the limited road networks in China was also tackled in the study; as a larger and more efficient road network would be needed to support the increase in motor vehicles on the road. The aspects of elimination of pollution through more efficient vehicles was also reviewed (National Academies Press, 2003).

Another venue for the transfer of technology is the formation of the Technical Consortium on Materials and Technology. It is again a partnership with GM China as the main support agent of five partner Chinese universities. GM China support here is in the form of making the technology available and funding research to improve on this technology and adapt it to Chinese vehicles (National Academies Press, 2003). One partner university is the Shanghai Jiao Tong University (SJTU). In 2000, GM Detroit established the Body Manufacturing Satellite Unit in the SJTU. The general objective of this activity was to improve the technical stature of the SJTU and other Chinese universities by providing them with the latest technological aids.

In 2002, GM Detroit donated the latest computer aided design manufacturing equipment to this university. The equipment was composed of both software and hardware plus the training to use these to manufacture the Chevy Avalanche and the Emery (GM in Shanghai, China). GM China again provided technical assistance to The Chinese government in 1999 with a joint research agreement to the Sino Environment Protection Agency to look into vehicle emissions control and environmental protection. In 2004, GM China provided for the transfer of technology in the presentation of the hydrogen fuel cell powered vehicle.

This type of vehicle utilizes hydrogen as its main fuel and emits water as a by-product, thereby ensuring environment protection. The technology was brought into China and again the PATAC was once more designated as the lead agency that would look into the redesign and adaptation of the said vehicle for the Chinese market (Green Car Congress, 2004). One more way by which technology is transferred to GM China from its main headquarters in Detroit is that even the suppliers of GM in Detroit are encouraged to come to China to share their technical know-how with local automotive parts suppliers and manufacturers. There are numerous joint research projects between the foreign and local suppliers. The GM Technical Center in Warren, Michigan acts as the technical integration for all the joint research projects between these groups (Industrial Base Programs, 2005). The transfer of technology is not only related to the research, development, design, and testing of vehicles.

Likewise, the flow of technology includes the other support functions as well. In the 2003 Automotive News China Congress, many American engineers have spoken at symposia for the automotive industry, sharing their expertise in other functions. For instance, in 2001 at the Global Sourcing and Chinai??s Automotive Industry Conference in Beijing, Mr. David Whitman, the Executive Director of Materials Management of Shanghai GM was a main speaker.

He discussed the current trends in Materials Management at the said event. Also, at the 2003 Automotive News China Congress, Mr. Troy Clarke, the President of GM Asia and the Pacific spoke on pressing issues on Labor Management in the Asian setting. In the same conference, the many modes of sales and distribution as well as after-sales service were thoroughly discussed by GM China American expatriates.

GM in Detroit continuously sends many of its managers to China to share their expertise in many other fields. It is a known fact that the main headquarters of GM always sponsor many Chinese engineers to scholarships for post graduate courses in US universities also with respect to management practices. As mentioned earlier, they are also sent to other GM operational units worldwide not only as observers, but as working individuals as part of their professional development programs. The main programs include professional management, financial management, sales, labor relations and government transactions reporting (Gallagher, 2003).

Conclusion Therefore, there are indeed numerous avenues for the transfer of technology from GM to GM China. They come mainly in the form of joint venture partnerships, which allows for the free flow of information from one end to the other. Chinese engineers and managers are sent to American universities and GM offices worldwide to increase and enhance their capabilities and share them back home. American professors, scientists, and engineers are likewise flown into China to share their expertise in their particular fields.

GM China has entered likewise into partnerships with prominent Chinese universities, furnishing them with training and equipment in order to produce many more capable and productive engineers. Coupled with this transfer of technology and the implementation of research and development initiatives in these joint venture arenas are the many conferences, seminars, and programs sponsored or conducted by GM China with respect to the improvement of the Chinese automotive industry. However, the partnership is not without thorns. In 2003, GM accused the SAIC of plagiarism in the latteri??s production of the Chery, a locally-designed and manufactured car.

GM alleged that many of the Cheryi??s features are similar to the Chevy Spark, a GM product. Also, many analysts of the Chinese automotive industry purport that the transfer of technology is geared more towards development, and forgets the research aspect. These same analysts say that the PATAC has become more of an emission testing and control center rather than a true research center. In return, SAIC also has doubts that the clean fuel technology being transferred from GM Detroit is not the latest, and that there is much more to be desired with respect to this aspect. GM, on the other hand, is also wary of the other partnerships that the SAIC has entered into with other worldwide automotive manufacturers.

For instance, it has partnerships with Volkswagen and Range Rover. However, other analysts are quick to say that SAIC has been successful in building a firewall between its partners in terms of privacy regarding technology (Gallagher, 2003). Whatever the problems are, the joint ventures will definitely be here to stay. The realization of the immensity of the Chinese market and its potential growth for the years to come is the very reason for the existence of these partnership-entities.

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