Jiazi Guo

China Risun Group (Hong Kong) Corporate Fellow

Olin Business School: Business Administration | MBA


Cohort 2010


Graduated 2012

Partner University:

Peking University


Career: Business Intelligence Engineer | Amazon China Technology | Beijing, China

Scholar Highlights

GM China vs. Ford China: A Business Partner Choice

As domestic and worldwide auto-manufacturing giants, General Motors and Ford are comparable on many levels. GM’s 2011 global revenue stood at $150.3 billion, while Ford’s was $136.3 billion. GM’s 2011 global unit sales, however, were 58 percent higher than Ford’s, and in China GM’s sales were almost five times higher than Ford’s.

Several reasons might explain why GM is doing so much better than Ford in China. One unremarkable (at first sight) but important reason… was the choice of a Chinese business partner.

This is especially significant because it was pointed out to me, during my March 2012 MBA Global Management Study trip, by managers from both GM China and Ford China.

In 1997, GM entered China by forming a joint venture with Shanghai Automotive Industry Corporation (SAIC). Four years later, Ford formed a joint venture with Chongqing Changan Automobile Group (CCAG). Both SAIC and CCAG belong to the top four automobile companies in China. However there are several noteworthy differences between the two. In 2011, automobile sales of SAIC were more than 4 million units while those of CCAG were 2 million. Most of the cars sold by CCAG were in the mini segment and only 0.22 million were in the sedan segment. In contrast, most of the cars sold by SAIC were in the sedan and SUV sectors. Reviewing the history of the two companies, the contrast becomes even more stark. First, SAIC is located in Shanghai, the most developed city in China with special political and economic influence. Due to its attractive location, SAIC gained the support of Shanghai and even the central government and became the number one automobile company in China in the early 1980s. CCAG, in contrast, is located in Chongqing, one of the main cities in western China. Although Chongqing became the fourth largest municipality in 1999 due to the West China Development Drive initiative, the gap between the two cities still exists and is growing.

Because of its early advantages, SAIC invested heavily in sedan manufacturing lines as well as technology innovation and new brand development. This was happening while CCAG invested only in mini manufacturing with few self-owned brands. The gap between the two companies is also due in part to the fact that CCAG missed the boom period of the private car market in China. Consequently, CCAG lacks influence and brand awareness in mid-high level automobile market, which is one of Ford’s main target markets.

One more fact worth mentioning is that GM is not the first foreign company to partner with SAIC. In 1985, 12 years before the GM partnership, SAIC and the Volkswagen Group formed Shanghai Volkswagen, the first foreign joint venture in the Chinese automobile industry. The experience gained with the Volkswagen Group provided SAIC with better insights and understanding of such unique joint ventures, which made the cooperation with GM proceed much more smoothly. In contrast, Ford was the first foreign business partner for CCAG. From the beginning of this cooperative effort, conflict and management problems arose, resulting in frequent changes of the senior management team at Ford China.

As a minicar manufacturer with a privately owned background, CCAG is weak in government networking and in mid- to high-end car brand awareness. Since government purchases are a highly profitable segment of the automobile market in China, Ford is missing out on a great opportunity. Recently, Ford realized the weaknesses of its partner and tried to connect to other stronger local automobile companies, e.g. First Automobile Works (FAW), the oldest and second largest automobile company in China. FAW started as a state-owned corporation and had strong connections with the government. Ford provided FAW with technology support even after it chose CCAG as a strategic partner. The connection may provide Ford with government support in the long run.

In sum, there is a fairly straightforward structure of cooperation between foreign and Chinese automobile companies: foreign companies provide technology and investment while Chinese companies provide government networking and local brand support. For Ford, CCAG does not have the right brand image or strong government networking ties. For GM, SAIC provides both. Why would Ford choose such a weak partner? As early as 1995, Ford and SAIC held discussions about cooperating and establishing a Sino-foreign joint venture. Unfortunately, the negotiations failed and Ford refused to accept SAIC’s conditions. Instead, GM accepted and seized the opportunity with SAIC. Does Ford regret its decision after 15 years of business in China? I cannot say, but if I were them, I would.

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