Nexteer Automotive on frontier on expected wave of Chinese automotive … – Detroit Free Press

Posted: Monday, July 14, 2014

As a pioneer on the frontier of Chinese automotive investment in the U.S., Laurent Bresson knows the world is watching his every move, and he’s OK with that.

Bresson, 42, is a Frenchmen running a global automotive supplier in Saginaw that is controlled by Chinese investors.

Since it was acquired more than two years ago, Nexteer has won new contracts with U.S. automotive manufacturers for its steering systems and launched a successful initial public offering on the Hong Kong Stock Exchange. It also added about 1,150 workers at its plants in Saginaw and invested about $300 million there.

That makes Nexteer a prime example of Chinese investor success in the U.S. automotive industry as dozens, if not hundreds, of other Chinese auto suppliers and investors explore opportunities to invest in the U.S. and Michigan automotive industries.

The Chinese government is encouraging its manufacturers to expand globally. Nexteer — a former unit of Delphi acquired by Pacific Century Motorsin 2010 — is known as the largest and highest-profile acquisition of a U.S. auto supplier by Chinese investors.

“The Nexteer story is followed really closely — extremely closely, I would say, by every stakeholder, by the community, by the Chinese government for sure, the potential Chinese investors — whether public or private — everybody is watching this closely,” Bresson said.

Steven Hilfinger, former chief operating officer for the Michigan Economic Development Corp., said in June that Chinese investors and corporations have invested more than $1 billion in Michigan since 2000.

“The Chinese auto suppliers need to have research and development and technology that they don’t have, and that is bringing them here,” said James Cambridge, a partner with the Detroit law firm of Kerr Russell.

Chinese automotive investment in the U.S. is often politically sensitive because of concerns over intellectual property theft and China’s ability to produce automotive parts cheaper than U.S. competitors.

Wanxiang Group’s acquisition of U.S. battery-maker A123, for example, was initially held up by a review conducted by the Committee on Foreign Investment in the U.S. But as Nexteer and others have shown, Chinese companies are interested in gaining market share in the U.S. and investing in U.S. facilities.

ZYNP North America, for example, opened in Romulus in 2005. In 2013, the company received a $350,000 incentive from the State of Michigan to support a $9.5-million investment in a research and development center.

Interior components manufacturer Yanfeng USA, which is owned by SAIC Motor Group, opened in Warren in 2010 and quickly expanded into a site in Harrison Township. It also formed a joint venture with Johnson Controls in April.

One of the major forces behind the investment surge is the Chinese government, which is pushing its manufacturers to invest in the U.S. and establish a manufacturing and research and development presence here.

“Domestically, there is tremendous pressure to find a technological edge,” said Brian Connors, the China business attraction manager for the Michigan Economic Development Corp.

The Chinese automotive industry has become larger than the U.S. automotive industry. Nearly 22 million new cars and trucks were sold in China last year compared with 15.6 million in the U.S.

However, China’s multitude of homegrown car companies is struggling to gain market share for their own vehicles while joint ventures with global automakers — ranging from General Motors to Volkswagen — are thriving.

The Chinese government wants its automakers and suppliers to become global players, but to do that, they need a global presence and to develop components and cars that are more sophisticated. To achieve that, they need to invest in the U.S.

“They have cash, but they have an uncertain future when it comes to the competitive and technological edge,” Connors said. “And the North American market is perceived as the gold standard.”

Last month, Yang Dong, executive vice president and secretary of the China Association of Automobile Manufacturers, said Chinese companies must establish research and development centers in the U.S. Dong said Chinese companies are only investing 1.1% of their revenue into research and development.

“We need to be on the same page as Detroit Three — inputting the same amount in automotive research,” Dong said.

Jerry Xu, president of the Detroit Chinese Business Association, said Michigan is in a strong position to benefit from Chinese automotive investment.

Gov. Rick Snyder and other economic development officials have visited China three times to recruit investment, and Wayne County Executive Robert Ficano also has been a vocal proponent of building ties with the Chinese. Michigan has an infrastructure to support the automotive industry, and GM and Ford have invested heavily in new auto plants in China.

“Detroit is probably the best place for Chinese manufacturers to grow their business, other than China,” Xu said.

In America, there is a reluctance to embrace and welcome Chinese investment — in part because Chinese industry has earned a reputation for infringing on copyrights and for manufacturing low-cost, lower quality products. Also, Chinese investors don’t like to make a big show of their investments, especially when they are blazing new trails in risky ventures.

John Wagster, an attorney with Frost Brown Todd in Nashville, Tenn., said that is a shortsighted view.

“I think it’s about time that Chinese investors start putting money and investing in the U.S., just like U.S. investors are investing in manufacturing facilitates in China, either through partners or on their own,” he said. “They create jobs, they pay taxes, and it’s good for the economy.”


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