A Santana story

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

by Martin Posth; John Wiley & Sons; US$19.95

Whatever your take on the Volkswagen Santana – great mobilizer of the Chinese people or a weapon of mass destruction in a Shanghai taxi driver’s hands – there is no denying its impact on China. The launch of the vehicle in 1984 marked the mass market debut of foreign autos in China, and the joint venture structure through which the German firm made its entry endures to this day.

The man tasked with steering the venture on the German side was Martin Posth. In 1,000 Days in Shanghai, he tells of the emergence of Shanghai Volkswagen, a collaboration with Shanghai Automotive Industry Corp (SAIC).

First of all, don’t be put off by the big VW on the cover. This book is about more than just cars. While the specifics relate to body shops and completely knocked down vehicles, the challenges are common to all foreign investors in China.

Antiquated production lines are renovated and new processes introduced despite the truculence of an unmotivated and inefficient workforce. Staff training programs are implemented and improvements are made to working conditions in the plant. A knowledge-transfer system is set up through which foreigners pass on expertise to local workers, hopefully giving these local workers a sense of responsibility and awareness of their roles in the production process.

There are also accounts of dealings with joint venture partners whose expectations for the business are not always in tune with those of the foreign party; and government officials looking to win concessions by suggesting they might go and do business with the foreign firm’s direct competitor.

What is particularly interesting about Posth’s analysis is that it includes comments and reflections from some of the Chinese managers and officials he worked with at the joint venture. The reader is, to a degree, given both sides of the story.

End of the road

The book ends in 1989 as Posth completes his stint at Shanghai Volkswagen. Although he went on to head Volkswagen Asia-Pacific – and presumably remained informed about the firm’s China operations – he was no longer on the inside.

With the aid of hindsight, it is curious to read about a time when China had trouble generating foreign currency reserves. The role played in the joint venture by Jiang Zemin and Zhu Rongji, both former mayors of Shanghai who went on to become the nexus of the country’s third-generation leadership, is also worth noting.

However, Posth doesn’t do enough to leverage this hindsight. In the 19 years since he left Shanghai Volkswagen, China’s auto industry has undergone considerable change. There is, for example, nothing on the Volkswagen response to SAIC setting up a second joint venture with General Motors. Neither are we offered any insight into the discovery that Chery – in which SAIC was an investor – was producing what was in effect a knock- off version of the Volkswagen Jetta.

Without such details, an account of Volkswagen’s China adventures seems dated or incomplete. At the very least, Posth could have discussed how the joint venture fared in comparison to the expectations of the early 1980s and what its future may hold.

As it is, 1,000 Days in Shanghai is a solidly told story of the creation of a landmark joint venture in China. But you are left thinking it could have been much more.

TIM BURROUGHS

Excerpt: Mercury rising

In a modern paint shop, complete body shells pass through an immersion coating zone. The whole process is a closed system. Anting in 1985 was completely different. The Chinese used an electrical winch to immerse the complete body shell into a paint pool. They had special wire cages for the dip-coating parts. In the course of a regular inspection we noticed that mercury had been added to the paint in the immersion basin to improve its conductivity. The poisonous vapors that escaped were a danger to the health of the people operating the plant. We raised the alarm: "Guys, mercury is a poisonous and really dangerous material. We have to fly in some experts from Wolfsburg to decontaminate the place …"

One Friday, just before the weekend, we brought our mercury expert along. When we went to have another look at the mess on Monday, we couldn’t believe our eyes. Less than two days after we had raised the hazard alarm, there was no mercury to be seen anywhere. Everything was gone and nobody knew where it had gone. We never did find out who had gotten rid of the mercury, but we did find out where it had gone. The Chinese had dumped the whole poisonous mess into the river.