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1,000 Days in Shanghai: The Volkswagen Story - The First Chinese-German Car Factory



1,000 Days in Shanghai: The Volkswagen Story - The First Chinese-German Car Factory

Martin Posth, Ian Travis (Translated by)

ISBN: 978-0-470-82388-0 August 2008 250 Pages

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Posth arrived in China with a vision. He navigated a steep learning curve, achieved his goals and now shares an insightful, first-hand account of an intriguing journey that included bumps and highlights. 1,000 Days in Shanghai is a breathtaking manual for anyone contemplating a business career in the increasingly vibrant arena of today's China. It is also a personal account, done with great sensitivity, revealing between the lines a deep respect for the spirit that propels China's social and industrial revolution today.
—Hans Michael Jebsen, Chairman, Jebsen and Co., Ltd.

To really understand China's economic development, one needs to look at the history of individual projects. This applies in particular to those who are considering a venture on site. This book by Martin Posth is a unique document on the subject: evidence of profound knowledge, didactically sound, with comprehensible conclusions--simply readable!
—Prof. Heinrich v. Pierer, Former Chairman of the Supervisory Board, Siemens AG, Former Chairman of the German Asian-Pacific Business Commission, Co-Chairman of the German-Chinese Dialog Forum

This book is a must-read for anyone seeking to work in or via China. The personal experiences of a pioneering manager can also help management to see the transformation of China in a new light. Anybody wanting to be successful in China should heed the practical lessons that Martin Posth draws.
—Prof. Dr. Eberhard Sandschneider, Otto-Wolff-Director, Research Institute, Executive Officer, German Council on Foreign Relations (DGAP)

In establishing the Volkswagen works in Shanghai at the beginning of Deng Xiaoping's reform era, Martin Posth made a breach in the wall behind which the People's Republic of China had dug its trenches up until then. His experiences are useful for anyone wanting to work the Chinese market with any degree of success. The fascinating reading that his report makes, and heeding his lessons, can help any entrepreneur to avoid costly mistakes.
—Dr. Theo Sommer, DIE ZEIT, Editor-at-Large

For the Chinese, this book by Martin Posth is a historic document on the Open Door Policy for foreign investors. It is a must-read.
—Prof. Xu Kuangdi, Mayor of Shanghai 1995-2001; Chairman, China Federation of Industrial Economics (CFIE); Co-Chairman of the German-Chinese Dialog Forum

Foreword xi

Preface xiii

Abbreviations xv

Chapter 1: China’s Dream of Detroit—Wolfsburg’s Gateway to Asia 1

First sight of the factory in Anting 1

History behind the deal 4

Spurned by the Japanese: Citroën or Volkswagen? 7

Setting the foundation 9

A Volkswagen pioneer for the Middle Kingdom 10

Not a fairyland but an entrepreneur’s playground 13

Partnership premier for the group 15

Vision of the future 18

Round the transatlantic world of Volkswagen 21

Quick lessons: Prepare your China engagement thoroughly 24

Chapter 2: Culture Shock—Chaotic Beginnings in Anting 25

Arrival in a strange and fascinating world 25

Living conditions in Shanghai then 27

Piano, ballet in Shanghai, 1,000 year-old eggs 29

Shopping, haggling, Hollywood at the Bund 31

Fitting derelict buildings with modern machines 32

Santana in China from below zero 34

Mercury rising 36

Delivery kinks 38

The struggle for change 39

Leadership with “scientific management” 41

Model discussions at the dinner marathon: Santana or Audi? 43

Audis battle Santanas on Chinese ground 45

Quick lessons: Avoid unnecessary start-up problems 48

Chapter 3: Talent—The Secret of Our Success 49

Changing a comrade’s mindset 50

The forgotten equation 51

Laying the foundation for training 53

Woes of the expatriates 54

Too many Germans 55

Faults and conflicts 56

German expat solidarity 58

Transferring management know-how 59

Déjà vu 62

Quick lessons: Forget China if you don’t have China-compatible staff 64

Chapter 4: Cash Shortages and Risky Financial Maneuvers 65

Messy hand of central planning 65

Budget blowouts and money problems 67

The Chinese accepts higher costs 70

Maiden bonds 73

Quick lessons: Make sure your business in China is profitable 76

Chapter 5: “Big Project” Poker 77

Competition 78

Dr. Hahn’s ideas for reinforcing the partnership 78

Building container ships 80

Dealing with Beijing, central government 81

Expedition to SAW in Shiyan 82

China’s automobile agenda 2000 84

The curse of waiting 87

An “unofficial visit” to Changchun 89

FAW and Volkswagen 90

Quick lessons: Gain in-depth understanding of the nature of competition in China 94

Chapter 6: Two Partners, One Dream: The Most Modern

Automobile Factory in China 95

Misunderstandings and red tape 95

The battle against mistrust, fear and ignorance 98

The problem with responsibility 100

Big wolf 103

Pioneering work in management 104

Shanghai Volkswagen: Dreaming the same dream? 107

Quick lessons: Create a solid foundation for intercultural cooperation 110

Chapter 7: The Open Secret of the Learning Factory 111

Interesting find 113

Paul’s intelligent production design 114

Japanese in Shop 54 115

Capacity limits 117

In search of perfection 119

Introducing market mechanisms at the factory floor 121

How to break the “iron rice bowl” 121

Leadership: Encouraging partners to act 124

Quick lessons: Use your “zero hour” in China 126

Chapter 8: The Joint Venture and Its Parents 127

The genie in our bottle—the spirit of collaboration 128

Loyalties and conflict 130

Principle of consensus versus pressure “from above” 133

Putting forward one voice 135

Clear words from Beijing and an official complaint from Wolfsburg 136

Media distortions 139

Quick lessons: Make sure local management has autonomy to act 142

Chapter 9: The Santana: Trendsetter for Motoring 143

Map to market 144

Of markets and pricing 145

Fighting central planners 146

Advertising cars, the Chinese way 148

The birth of customer service 149

Dream car 150

Dream Ship and a vision for China 151

An Audi flag in Anting and its consequences 152

Surprise session 153

Quick lessons: Identify a specific and direct path to the customer and build on it 154

Chapter 10: The Long March to Localization 155

Fragmented auto supplies industry 156

No compromises 157

Beyond the Bund 158

Pressure for progress 160

Slow breakthrough 162

Rev up from Zhu Rongji 164

Quick lessons: Localization is the key to cornering the market 166

Chapter 11: In The Dragon’s Den: Politics in Deal-making 167

Big trouble with the horn and the steering wheel 167

A venture is like marriage 170

Power of Shanghai municipality 171

Shanghai Volkswagen runs out of time 172

Waiting for the carrot, or the stick 174

The end of Luo Pu Road 175

Quick lessons: Secure political support for your project 178

Epilogue: At the End of 1,000 Days 179

Report card 180

The factory—a role model of modernization 183

Where East meets West 184

Quick lessons: Enjoy sustained profits from your China operations 186

Endnotes 187

Index 189