The China Drive

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As Washington prepares to vote on trade, GM finds profits in the Middle Kingdom
By TERRY MCCARTHY Shanghai

The Mickey Mouse jingle is sounding again at station 121R on the Shanghai General Motors assembly line. The procession of semiassembled cars and minivans halts, and workers start frantically pulling off an exhaust pipe from a blue minivan. Dennis Dougherty, GM's man in charge of manufacturing, is watching the process apprehensively from 45 m away. Blue-uniformed Chinese engineers come running to help. But Dougherty doesn't move. Two minutes later, Mickey Mouse stops, the line starts moving again ... and Dougherty's expression relaxes.

It is gut wrenching. There's something wrong, and your instinct is to jump in there and fix it, says the 48-year-old Maryland native, who has been in Shanghai since 1996. But you've got to let the system work, got to let the team you have trained solve the problem.

In the beginning, there were so many problems that nobody outside the small Shanghai GM (SGM) project team thought the venture could work, even with $1.5 billion to invest. Build a factory in a marsh, train Chinese workers to international standards and bring to market a car costing $40,000 in a country where per capita gross domestic product is less than $800? In two years? But work it has. In its first year of production last year SGM sold 20,000 Buick Century sedans--more than double the target--and declared a $75 million profit. In addition to the original model, the company has launched two new vehicles, including a minivan, which goes on sale this week, only five months after the plant geared up production for it. There have been plenty of problems and more than a few Mickey Mouse alarms along the way, but the auto plant has become a textbook example of how a joint venture in China can succeed--as well as a prime exhibit in the politically charged debate over U.S.-China trade. Just as President Bill Clinton launches a final effort to convince Congress that China deserves permanent normal trade status, there are still plenty of critics who see the communist goliath variously as a strategic threat to the U.S., a vast sweatshop economy swallowing up American jobs and a serial abuser of human rights. Even free-trading multinational corporations experience enormous frustrations trying to do business in China. Countless joint ventures have soured on disagreements between the partners, contract violations and unrealistic expectations of quick profits. A survey last year by management consultants AT Kearney found that 60% of all foreign companies were unprofitable in China.