Chery Learns

A few days ago we wrote about how Toyota is experiencing the power of people... both in terms of losing some top flight executives to competitors as well as experiencing growing pains with trying to train new managers in the Toyota way.  On the front of yesterday's WSJ was a good article on Chery, the up-and-coming Chinese automaker, and their growing pains.  Although most of the article dealt with operational aspects of rapid growth, the knowledge development and knowledge management side of things was evident.  Chery knows the global auto market is just a little bit different than it was in the 70's when Toyota was first entering the fray.

"There's no way you can move slowly and catch up," says Xu Min, a former Chery engineer who is now dean of Shanghai Jiao Tong University's Institute of Automotive Engineering. "It took the Japanese two or three decades. We didn't have that kind of time."

And they are doing their best to move fast.

At Chery's research and development center, engineers say they are now at work developing 40 to 50 new car models, at least 10 of which could be ready for production as soon as next year. The company is building new assembly lines that next year will boost its capacity to about 700,000.  Mr. Yin sets an urgent tone both inside and outside the company. Parts suppliers say they are frequently called to meetings at Chery headquarters late in the evenings and on weekends, as Chery engineers and executives try to push projects forward in a hurry.

With top-notch state-sponsored infrastructure.

Inside the gates of Chery's sprawling production complex, where few foreign reporters have been allowed before, assembly lines run 16 hours a day. Much of the equipment is state-of-the-art, imported from Europe. The engine plant has German precision-milling machines and Italian robots. The paint shop is from Germany.

But people, skilled people, have become the bottleneck.

Rapid growth is already taking its toll, as executives strain to manage the company's expansion amid a shortage of experienced workers. "We are still fighting for our survival," says Mr. Yin. "We didn't get to learn from books. We have to learn everything by doing it."

So throw in a bit more knowledge, and...?  How are they going about acquiring that knowledge?  First by exploiting a new deal with Chrysler.

Chery says it expects to benefit from Chrysler's technical expertise and established sales and service networks. Even though their cars will be sold under the Dodge brand, they expect consumers will know they are made in China by Chery.  "People look down on our products. There are many doubts about our safety and quality," says Mr. Yin. Selling under the Dodge name initially will boost buyers' confidence, he says. "If we work together with Chrysler, we can go global faster."

Not to burst his bubble, but many people look down on Chrysler products as well.  Well, ok, that was perhaps an unnecessary dig. 

Chery can "offer low-cost platforms with speed," says Tom LaSorda, president and vice chairman of Chrysler, which has said it will eliminate 25,000 jobs in North America. Visiting Chery's plants in 2006, he says, he found that "everything was very familiar," with production processes and equipment very similar to those in top Western factories.

Only time will tell if this was a good move for Chrysler to gain a toehold in the nascent Chinese market, or if they will have sped up the creation of a new Toyota-like competitor.  While giving up 25,000 people with knowledge, creativity, ideas, and experience.  Funny how that works.  And some of those "displaced" auto people are finding new homes... at Chery.

They cobbled together a team with connections to Anhui, including Mr. Yin, an Anhui native who was lured away from a Volkswagen joint venture.  Encouraged by sales in Chery's first two years -- and by signs that China's auto market was revving up -- the company and its state owners decided to embark on a massive new investment program. Chery also stepped up its efforts to recruit Chinese nationals working for auto companies abroad, as well as to bring foreign expertise to Wuhu.

What goes around, comes around.  What will you be driving in a decade?  Thirty years ago would you have said "Toyota?"