Daniel Gross

Why Buick Is Big in Beijing — and Elsewhere in China

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Buick has a presence in China dating back to a century ago.

SHANGHAI, China -- No matter how many times you visit an auto plant, the assembly line still appears to be a modern miracle. As body frames move slowly along the line, teams of workers bolt on parts in an intricate choreography. In a matter of minutes, metal, plastic, rubber and paint come together to turn a shell into a vehicle that rolls off the line under its own power. In the clean, highly automated facility, electric notes ring out every so often — a characteristic of the widely adapted Japanese Andon system.

When the tones of Old McDonald,or London Bridge ring out, it's a sign that a particular section needs help. Overhead, electric displays show how many cars have been completed and the quality rate. When lunch hour rolls around, hundreds of workers, wearing blue and green uniforms, file into a lunch room.

It could be Michigan, or Germany, or Japan. But this assembly line is in the Jingqiao district of Shanghai, an area of office parks, corporate headquarters, and sophisticated manufacturing plants. It belongs to GM Shanghai, a joint venture of General Motors and Chinese car company SAIC, Here, the revived car company is reviving a brand that has been left for dead in the U.S.: Buick.

Buick has a second life in China as an upscale brand. If you get picked up and taken to the airport in a car service, it's likely to be in a black, four-door Buick Regal sedan. The Excelle, a small vehicle modeled on the Chevrolet Cruze, is a high-volume product: 200,000 are made each year in China. The GL-8 SUV retails for 288,000-388,000 renminbi ($45,000-$60,000). Buick is tapping into a long legacy in China. It is commonly noted that the Last Emperor owned one nearly a century ago. GM, which also makes various Chevrolet models for domestic sales at two other plants in China, has a network of about 1,000 dealers. All in, GM has the capacity to produce 1.2 million cars in China — 600,000 in the two assembly lines at the Shanghai plant.

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The Buick Excelle is an upscale, high-volume model in China.

This plant isn't that much different from other plants I've visited in the U.S. and Japan, including the hyper-automated factory where Toyota makes the Prius. Labor is still very cheap in China. And when asked about the labor and wage rates at this plant, company executives tended to clam up. But in modern car manufacturing, labor is only a small part of the cost. "We have standard processes through the world," notes David Gibbons, executive director of manufacturing at GM Shanghai. As Gibbons took me and a group of visitors on a buggy ride through the plant, he described how GM implements its standards on ergonomics, productivity and lean manufacturing here. Each station maintains just one or two hours worth of inventory. Welding is 60 percent automated. In the final stages of the line, employees wear white gloves to protect the finishes. Turnover is about one percent. "These are permanent jobs," he said.

Despite the vast differences between the Chinese and American economies, large multinationals, like GM, today operate in something of a global bubble. Visitors are struck more by the similarities between this factory and one of its counterparts in the U.S. than by the differences. Shifts here are 10.5 hours instead of eight hours in the U.S.; there's a little less automation; unions have less of a say in setting work rules, and the workforce is younger. The stark difference is really now within China, with a gap opening up between the more expensive and developed coasts and the cheaper, less-developed interior. Two years ago, I visited a plant in Chongqing where a joint venture of Ford and Chang'an was cranking out cheap minivans (sticker price: about $7,000) for peasants. That was like stepping back in time a few decades. The climate was barely controlled, automation had barely kicked in, and quality seemed an afterthought.

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Buick’s sedans are luxury cars in China.

GM Shanghai has two plants elsewhere in China, where it makes Buicks and Chevrolets, and has a total production capacity of 1.2 million cars. While it employs about 8,000 people in China, only a few are Americans — mostly top managers in manufacturing, finance, logistics and marketing. But the Chinese market provides important ballast for the car company and benefits all its stakeholders: investors who own its bonds and stock (including U.S. taxpayers), workers who hope to collect pensions and receive health care during their retirement. The ability of GM to meet all its financial obligations depends as much on how things go in China as on how they go in the U.S.

Despite the frequently insane traffic in China, car sales continue to grow rapidly. When it reported third-quarter earnings yesterday, GM noted that sales in China rose to 620,000 in the quarter, up 10.6 percent from 567,000 in the third quarter of 2010. Having been deprived of so much for so long, China's consumers accept clogged roads and bumper-to-bumper traffic as a sign of progress. And that's keeping the assembly lines in Shanghai busy turning out Buicks. The plant runs two 10.5 hour shifts per day, nearly seven days a week, and can produce nearly 90 cars per hour. Said Gibbons: "We're fully loaded here."

Daniel Gross is an economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.

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