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

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

Table of Contents:
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

About the Author :
Martin Posth is a former member of the executive management board of Volkswagen AG and Audi AG. In the mid-1980s, he built up Shanghai Volkswagen together with a team of pioneers. In the 1990s, he oversaw the Asia-Pacific business of the Volkswagen Group out of the regional headquarters in Hong Kong. In June 1997, Posth was awarded the title of “Honorary Citizen of Shanghai.” Today, Posth serves as a member of the board of directors of various leading international companies and committees in Europe and Asia.