Auto Industry News

Chinese Automotive Business to Go the United States - Opportunities and Challenges

09-06-2014

Abstract

The history of China's automobile industry dates back to 1949, with the forming of a New China. By 1953, China established its first manufacturing facility, the First Automobile Workers (referred to as FAW). Following those next twenty years, China’s automobile industry continued to drift at poor production rates, poor technology, and sub-standard quality levels. Only through the 1978 economic reform, the emerging wave of globalization, and especially, China’s accession to the World Trade Organization, did China’s automobile industry start to see improvement. Automobile production and sales started to see rapid and extraordinary development. Technology and quality standards started to steadily improve. Following the current global economic recovery, as well as, the large scale entry into the Chinese era by the world's leading automotive suppliers, how will this manufacturing country fight to become a manufacturing powerhouse? The way China will accelerate the current process of advanced manufacturing is an important issue in front of us. Meanwhile China's auto industry is also facing unprecedented opportunities and challenges. In fact, China's auto parts enterprises already have a certain amount of international competitiveness. Plus, the key is to consider how to improve the capabilities of independent R&D and technological innovation. However, Chinese automobile brands entering the global market still have a long road ahead of them. America is still the world's largest economy with the second largest automobile consumer market next to China. In the current environment, Chinese auto parts enterprises are heading abroad, and going across the Atlantic Ocean toward the United States: to open up new horizons, to win over international markets, to recruit high-end talent with special focus to enhance self-innovation and capabilities in the R&D area, to enhance the status of international competition in the market, and to create an international brand that will usher in another new spring.

**Table of Contents **
Chapter I: Growth analysis on the U.S. auto and parts industry
1.1. Developmental history of the U.S. auto industry
1.2. Impact of economic globalization on the U.S. auto and parts industry
1.3. Impact of the global financial crisis on the U.S. auto and parts industry
1.4. Recovery status of present day U.S. auto and parts industry

Chapter II: Growth analysis on China’s auto and parts industry
2.1. 1953 – 1983 History of China’s auto and parts industry
2.2. Impact of economic globalization and China's accession to WTO on China's auto and parts
industry
2.3. Impact of the global economic crisis on China's auto and parts industry
2.4. Present day China's auto and parts industry
2.5. Introduction to the development of China's auto parts enterprises in the U.S.

Chapter III: Success stories of foreign auto companies developing in the U.S.
3.1. Success stories of Japanese companies developing in the U.S.
3.2. Success stories of Chinese companies developing in the U.S.

Chapter IV: Opportunities of Chinese auto parts enterprises going out
4.1. U.S. is a good investment environment today
4.2. Opportunities arise when supply chains become longer after the economic crisis.
4.3. Strategic opportunity for suppliers regarding parts standardization
4.4. Opportunities of the financial needs after the financial crisis
4.5. Opportunities of Chinese automotive OEMs entering the U.S.
4.6. Breakthrough the U.S.

Chapter V: The challenges that Chinese auto parts enterprises will face going out
5.1. Challenges with business management models
5.2. Legal system challenges
5.3. Challenges with language and culture
5.4. Challenges with industry norms
5.5. Challenges with anti-dumping

Chapter VI: Discussion about the method for going out.

Summary

Reference

Chapter I: Growth analysis on the U.S. auto and parts industry bold text

1.1. Developmental history of the U.S. auto industry
U.S. auto industry began in 1890. In the early 1900s, U.S. had three big auto manufacturers, known as “The Big Three,” that emerged: Ford, General Motors and Chrysler. Henry Ford began producing cars in 1896 and founded his own company in 1903. 1913 Ford Motor Company established the first conveyor belt assembly line, and began mass production of the Model T (it was introduced in 1908). These assembly lines allowed manufacturers to significantly lower costs (1924 Model T at $290 /per car), thereby, allowing cars to be affordable for the general public, and resulting in Ford becoming the nation's largest car company. Ford also pioneered overseas production bases with the first in the United Kingdom in 1911. In 1925, Ford established factories in Germany and Australia, and bought the Lincoln car manufacturer in 1922. Ford also established the Mercury brand in 1938.

In 1908, William Durant founded General Motors Corporation (GM). Durant was a carriage manufacturer, who acquired Buick in 1908. In the second year, GM acquired Cadillac, as well as other various auto companies and parts’ suppliers. GM followed Ford in expanding overseas by buying the British Vauxhall car company in 1925. In 1929, GM also bought the German Opel and bought Australia's Holden in 1931. In the late 1920s, GM surpassed Ford as the world's largest car manufacturer.

In 1925, Walter Chrysler formed the Chrysler Motor Company. In 1928, the company acquired Fargo trucks and Dodge Brother’s company, and started to sell these brands of vehicles. In the same year, Chrysler founded the Plymouth and DeSoto brands. In the 1960s, the company expanded to Europe by creating a division called Chrysler Europe that acquired French, British and Spanish companies. In 1987, Chrysler acquired American Motors Corporation (AMC) to make profits under its umbrella brand: Chrysler Jeep.

With the rise of the Big Three, U.S. also emerged with it a large number of independent R&D centers and capable manufacturers of auto parts.

1.2. Impact of economic globalization on the U.S. auto and parts industry
With the tide of economic globalization, beginning in the mid-1980s to the 1990s, the U.S. began a large-scale development of the automotive industry into the worldwide market. At the same time, the U.S. auto parts manufacturers began: to reduce costs, to implement global sourcing, and gradually close the in-house production factories by locating to Mexico and other low cost labor countries, such as the Asia-Pacific region in China, India and Thailand.

**1.3. Impact of the global financial crisis on the U.S. auto and parts industry **
The 2007-2009 global financial crisis on Wall Street, also known as the subprime crisis or tsunami, began on August 9th, 2007. Since the financial crisis, investors have begun to lose confidence in the value of mortgage-backed securities, triggering a liquidity crisis. Even multi-national central banks have repeatedly injected huge amounts of money into the financial markets, but could not prevent the outbreak of the financial crisis. On September 9th, 2008, the financial crisis spiraled out of control and led to the collapse of several large financial institutions or resulted in a government takeover.

The U.S. auto industry is an important industrial sector and a vital role in U.S.’s economic stability and development. Its share of the U.S. economy's output accounted for 4% to 5%, which is a well-deserved pillar in the industrial sector. It is because of the auto industry’s vital position in the American economic life that explained how the virtual financial collapse could have affected such a real economy.

Entering the second half of the year 2008, as a result of the financial crisis, the slowdown of American consumer spending, and coupled with the credit crunch, led to substantial reductions in the amount of car loan payments. The U.S. needed to accelerate this shrinking auto market, which The Big Three automakers saw through huge declines in sales. In September, national car sales fell by 27%, the largest decline in 17 years. It was announced on November that Q3 earnings report showed GM lost $4.2 billion, Ford lost $2.98 billion, and Chrysler being the worst of these situations. Other than the serious decline in sales, a larger consequence resulted when The Big Three automaker’s cash flow dried up, forcing them to drastically cut and layoff employees. The Big Three was now facing bankruptcy and an overall U.S. auto industry crisis. December 19, 2008, the U.S. government announced that because of
this financial crisis, GM and Chrysler would be provided $17.4 billion in emergency relief for the sake of rescuing the auto industry.

The economic crisis has also led directly to the sharp fall of U.S’s auto parts suppliers, resulting in longer supply chains for the U.S. auto parts suppliers.

1.4. Recovery status of present day U.S. auto and parts industry
The second half of 2009 the U.S. began to show signs of economic recovery, but the economy rebounded with a lesser extent and with a shorter duration. 2011’s Q2 and Q3 GDP growth began to stabilize and the supply chain growth rate continued to rise. After the economic crisis, the second comeback of the U.S. economy ended and rebounded on track in early 2012.

(1) Supply chain extended for auto parts’ suppliers
With the American economic recovery, demand for the automotive market increased dramatically, but the supply chain has become too long that it is now carmakers important topic of concern. Late
last year, the United States surveyed its suppliers and found that if North American auto production reached 16 million vehicles, automotive OEMs may face a shortage of parts.

(2) The potential risk of auto parts standardization
As we all know, the automotive world economic crisis was between 1993 and 1994. During that context of the time, in order to control automobile manufacturing costs, prominent representatives of the European community, started by Volkwswagen, frequently designed standardized components, and have launched their own platform and strategy thus far. Insiders also pointed out that "parts standardization will help improve the efficiency of vehicle development, shorten development cycles, reduce procurement costs, reduce quality risks, the assembly process, OEMs manufacturing costs.”

Recently, the Japanese 14 car and motorcycle companies will work together to set up the "international standard seminar." For the high versatility and car parts and other aspects of semiconductor unified specifications, development and production of parts and components in order to reduce costs and enhance competitiveness of Japanese cars force.

Currently, this large-scale standardization of parts will bring some risks. Once the parts have problems it easily triggers a chain of recalls. It is worth noting that, due to similar quality components, price competition will become more intense and a restructuring of the valuable vs. invaluable parts may also be accelerated. Regarding parts suppliers, this is a new opportunity, in which you can strive to become a strategic supplier to the OEMs.

(3) The economic crisis triggered by the financial demands
The economic crisis has caused the U.S. government’s funds to start drying up, and the U.S. auto industry is no longer a main focus of investment for private entrepreneurs. However, China’s private enterprises are currently in a booming stage. There are many private enterprises that through long-term of accumulation have a reached certain economic strength. Unfortunately, there is no better direction or channel for these investments. Therefore, there is an urgent need to guide capital investment to U.S.’s auto industry. By capturing new business opportunities during this recovery process, and resulting in the development of private enterprises in China will open a new chapter in its auto history. From federal government to local governments, the U.S., particularly Michigan (Motor City), are actively creating a comfortable environment for investment, operations for foreigners investments, all the while, China being their main focus on these investment objects.

In summary, U.S. auto parts enterprises are currently seeing supply chains becoming longer, and the standardization of parts has created a need for new strategic suppliers. Through the financial crisis crisis, the U.S. is in need for external funding, and the government has voiced suggestions to raise the
employment rate. All of these factors suggest that the U.S. is in one of its golden ages for current foreign investments.

**Chapter II: Growth analysis on China’s auto and parts industry****

**2.1. 1953 – 1983 History of China’s auto and parts industry
**
China's auto industry began in 1953, the year that China established the First Automobile Works (hereinafter referred to as "FAW"). In 1956, FAW produced its first vehicle on its first automobile
factory assembly line: the Jiefang truck. In the mid-fifties, the use of basic auto parts and accessories initiated a technological innovation in China’s factories. Self-reliance turned Nanjing, Shanghai, Beijing and Jinan into China’s four automobile factories, forming "One Big Four Smalls,” totaling five-car production bases including FAW. In 1965, these five production bases saw an annual production of about 40,000. Following 1966 and the establishment of Second Automobile Works, Sichuan and Shaanxi Automobile Works, production and development moved to mining trucks, dump trucks, and heavy vehicles. Due to China’s late start with its closed-door policy, China’s auto industry saw extremely slow development compared with its foreign counterparts. Thus, for decades, old cars changed in small amounts much less the production of its automotive parts, which continued to hover at its lowest levels. As a result, the substitute parts were also viewed with sub-standard technical levels, quality levels, and production quantities.

With the beginning of 1978 economic reform, the auto industry entered a stage of comprehensive development. The government vigorously sought investments for technology and adjustments into the product structure of commercial vehicles; thereby, ending the three decades of consistent systematic construction of the auto industry. The 1983-year introduced Santana, the first ever automobile rolled off the assembly line. But, the local car industry was subject to serious shortage difficulties with technical and financial resources. After Deng Xiaoping personally finalized that "cars can be a joint venture" in 1992, SAIC and Volkswagen began negotiations to establish the first joint venture. Santana from the beginning withstood enormous pressure, where all Chinese parts made must accept Volkswagen's quality certification. The impact of this quality certification resulted in difficult times for China's car industry, but opened a good head start into globalized standards. Early 1990s, Shanghai Santana, painstakingly saw a localization rate of 90%.

Issues regarding the auto parts: in the early construction phases of FAW, governments around the country arranged 86 auto parts manufacturing plants to undergo the same transformation towards quality standards. "Four Small" set up accordingly and established a large number of auto parts required by these vehicles. However, all these state-owned enterprises resulted in issues for the country with a whole variety of repetition, small-scale constructions, and lower production volumes. In the 1980s, the country’s "Sixth Five Year Plan" and "Seventh Five Plan" period, around the "six cars one machine" domestic support, the nation focused on introducing 70 kinds of key automotive components technology and imported a batch of key equipment. In the 90s, sedans and passenger car production began to expand their scope of cooperation and the use of joint ventures to achieve technological innovation. With the increases in auto parts production, three types of ownerships were established: joint ventures, sino-foreign cooperatives, or wholly-owned foreign enterprises. FAW, Dongfeng, Yuejin and other large enterprises saw suppliers gradually separate and establish wholly owned subsidiaries with their own separate legal personality. Through the process of reform and opening up, China has also emerged a large number of medium-sized private enterprises, so that suppliers and state-owned OEMs could now compete on the market to provide, not only for one entity, but rather for society’s interest. Thus, these large numbers of enterprises entered into a truly competitive market, where consumers would choose the winners.

**2.2. Impact of economic globalization and China's accession to WTO on China's auto and parts industry **
Entering the twenty-first century, along with economic globalization, especially the 2001 China joining the WTO, the U.S., Japan and other auto giants started entering China. China’s auto industry started to step up development, and has made remarkable achievements with the domestic and multinational auto companies in introducing technology, capital, but also in promoting the joint enterprise, mergers, asset restructuring, and cooperation with foreign strategic alliances.

Prior to joining the WTO, China's auto production scale was minuscule, with low labor productivity, low product development, inferior capabilities, technological backwardness, and imperfect quality control systems. Market share was not high and the auto consumption environment was poorly flawed.

2006 ended a three-year protection period, overcoming the "infant industry protection period," the Chinese car, for the first time, stood at international doors. Up to today, China's automobile has come from the world's eighth largest car producer and become the third largest producer. These also allow people to stand calmly and objectively analyze the new historical height of the pros and cons of China's automobile sector.

After joining the WTO, we have witnessed the following changes:
(A) The restructuring of domestic corporation automotive mergers, acquisitions, and joint ventures.
(B) Capital Structure: WTO mechanism for equal market access from the original single state capital, to private, joint stock capital structure.
(C) International auto giant’s massive invasion, acceleration the national auto industry.

The world's major car companies began to rush into China, bringing advanced technology and the latest models to Chinese enterprises. Through cooperation with the international auto giants,

China's auto industry has accumulated a strong manufacturing capacity and has improved their parts supplier system. This development of the national industry provided a foundation. To clarify, only after entering the WTO did China see a true sense for what a family car meant in the world. With the improvement of people's living standards and the demand for higher-end
products, such came the increased demand for cars. Population determines the amount of the demand; thus, China's enormous demand for cars is a huge demand for auto parts. The three decades after the reform and opening up, the country’s economy has been since in rapid and sustainable development. State-owned enterprises now have pockets full of money; private enterprises increase original accumulation of capital; increased foreign and joint venture investments; therefore, significantly improving people's lives. So began the pursuit of a greater variety of enterprise development: the bigger and the stronger. It is because they are aware that the development of foreign markets can nurture the domestic market in the future, and further enhance the company's global competitiveness.

Chinese-foreign auto companies increased quickly, but the variety of models developed faster. China's auto parts industry in terms of its products, the level of self-developed technology, supplier quality and supplier matching system, are still at a low level. Foreign companies have many reasons for controlling the procurement and maintenance of accessories and automotive components from suppliers. In addition, they wish to establish wholly foreign-owned enterprises and foreign held joint ventures in China. Famous part manufacturers such as Germany’s BOSCH, ZF, U.S.’s Delphi, TRW, Dana Corporation, Japan’s Denso, Aisin Seiki, Fujitsu, Alpine Electronics, and France’s Valeo have all been involved with numerous Chinese joint ventures and wholly owned enterprises producing automotive electronics, car audio, car chassis, body parts and so on. Famous foreign parts manufacturers entered the Chinese domestic market and intensified international competition regarding vehicle matching and repair parts. Both the production and marketing have received a great shock for these foreign parts manufacturers.

**2.3. Impact of the global financial crisis on China's auto and parts industry **
As we all know, in 2007, the outbreak of the U.S. global financial crisis on various countries around the world in various fields suffered great impacts. North America, Europe, and the Asia-Pacific region saw a sharp decline in the automobile market. Since 2002, China's auto market saw ultra high-speed growth for six years, far exceeding the growth rate of China's GDP. The global economic crisis led directly to the Chinese passenger car market losing the 20% growth from before. No doubt this has a long-term impact on China's auto industry’s consumption and investment. However it returned the growth rate of China's automobile industry down to its reasonable range.

After economic globalization, China's vehicle exports to the U.S. were trivial, but auto parts’ exports were abundant. The financial crisis marks a sharp decline in the purchasing power of American cars (see 2007-2013 American auto production and sales data), which was bound to affect China's auto parts’ exports. Although the crisis has said goodbye to China's 20% growth, there has been continued increase with the amount of China's population and increasing living standards. China's domestic market demand for cars is still quite large. (See 2007-2013 China's auto production and sales data). The
reduction in exports has forced suppliers to start thinking about how not only to seek bigger and more, but how to become stronger. This requires self-developed technology and design to enhance the ability of China's auto parts industry, as well as, a higher standard of quality control.

Yearly Vehicle Production Unit: million vehicles/year
2007 2008 2009 2010 2011 2012 2013
China 8.8 11.5 13.7 18.2 18.4 19.2 22.1
U.S. 10.7 8.7 5.7 7.7 8.6 10.3 11

**2.4. Present day China's auto and parts industry **
Auto parts industry is the whole automotive industry's upstream industry, and is an important indicator and measurement of the level of quality in the automotive industry. China’s auto parts industry was driven by the development of the automobile. As the automobile started to develop and quality international suppliers started entering the market, China’s auto parts industry started to become more independent and move away from government influence. Currently, China’s auto parts industry has reached a certain degree of international competitiveness in economic strength and size for self-developed technology, and quality standards.

How the Chinese auto and parts industry under the current size, strength, technological development capabilities enhance its competitiveness in the international market with a certain level of quality. The
key is to improve the ability of independent research, developmental and technological innovation, and develop independent brands. One of the more important ways is to directly go abroad.

2.5 Introduction to the development of China's auto parts enterprises in the U.S.
China’s auto companies, in the wake of the global financial crisis, began through acquisitions, the creation of service windows, research centers and other ways to enter overseas markets (especially the U.S.). Take the U.S.’s "car state," Michigan, according to local official statistics show that up to now there are more than 100 auto-related Chinese businesses that have invested in the Detroit area. Examples include:

Wanxiang’s lithium-ion battery supplier A123 Systems Inc. (A123 Systems) in Livonia, which was acquired earlier this year. General Motors and A123 Systems Inc. signed a contract, where they will provide batteries and related equipment for GM’s global electric vehicles market.

CNAC Nexteer Automotive, headquartered in 100 miles away from Detroit, in a city called Saginaw. They are a supplier of steering systems, as well as, the world's leading supplier of drivetrains. In 2011, they successfully merged with Central Air, which became the first Nexteer shareholders.

Changan Automobile, in Plymouth, Michigan established a R & D center that will focus on chassis design and technology. The R&D center will specialize in automotive chassis technology, including chassis performance development, design and manufacturing research processes.

Brilliance Auto in Lansing, Michigan provide new lightweight engine mounting systems for General Motors Cadillac ATS.

SAIC its North American headquarters in a surrounding city of Detroit called Birmingham, which focuses on procurement, logistics, technology and engineering.

China’s Shanghai Auto and Parts Export Base in Rochester Hills. It is the North American Service Center dedicated to providing services for China's auto parts suppliers.

**Chapter III: Success stories of foreign auto companies developing in the U.S.

3.1. Success stories of Japanese companies developing in the U.S.
**
In 1981, the Japanese car manufacturer signed a so-called "limited voluntary restriction agreement," in which they can export 1.68 million cars a year to the United States. The direct result of this quota is that the Japanese car companies began developing higher profit margin luxury cars, such as Toyota's
Lexus, Honda's Acura and Nissan’s Infiniti. Another result is that they began to open car-manufacturing plants in the U.S., of which the three largest Japanese car manufacturers opened in 1985.

Earlier in those periods, particularly in Detroit, people opposed and conflicted with Japan carmakers, often using U.S.’s "Big Three" car manufacturers to threaten or even hit Japanese cars. Some would even use a key to scratch Japanese cars. In order to prevent the occurrence of these events, Japanese car owners usually posted the words "I'm American" "Made in USA" as such on their cars.

Alongside the "Made in USA" phrase, growing influence and combined with the advantages of Japanese auto economy, technology, and quality, the "Big Three" started working with a number of Japanese carmakers through joint developments and inside production plants. Ford and Mazda cooperated and established their own joint venture called, Auto Alliance International. Chrysler and Mitsubishi Motors established a joint venture called Diamond Star Motors. The two auto giants Toyota and GM established a joint venture in California called NUMMI (New United Motor Manufacturing Company), which is the U.S.’s first joint venture car company. The company produced the Toyota Corolla, Matrix, Tacoma models, as well as the Pontiac Vibe, which was referred to as a classical example of a Japanese and U.S.’s company-wide cooperation.

3.2. Success stories of Chinese companies developing in the U.S.
Out of the many Chinese enterprises to enter the United States, one of the best is China's Wanxiang Group, whom opened a headquarters in Chicago called, Wanxiang America. Wanxiang American company incorporated in the United States in 1994, with a registered capital of only $500,000. In the

first year, their sales reached $3.5 million. After nearly two decades of unremitting efforts and struggle, Wanxiang reached annual sales of $3 billion in 2013. In attempts to knock on the doors of the world’s auto industry leaders, Wanxiang became a direct supplier to GM in 1997 by submitting sample parts five times, and ultimately achieving their aspirations by roughly a year of unrelenting efforts. Wanxiang America has taken the right road to a successful merger and acquisition. From 1999 to present, Wanxiang America has acquired left and right more than forty companies in the U.S. Among the more influential of the acquisitions are:

2001 acquisition of UAI, the number one biggest of seven U.S. auto parts suppliers. In June 2005, through the right acquisition link --PS Company, Wanxiang became GM, Ford, Chrysler and other three OEM’s Tier 1 supplier. The acquisition of AI, in 2007, marked Wanxiang’s direct access to the core of the global automotive industry chain. In 2009, the acquisition of a Connecticut steering system company set up "Global Steering Systems, LLC" The company's main design, development and production of automotive steering systems and components, ultimately have become customers for the world's major OEMs, such as GM, Ford, Chrysler, Fiat , Tesla, etc. December 2012, under the orders of Wanxiang America, Wanxiang Group invested another $257 million to acquire US-known leading
enterprise of new energy vehicle batteries: A123 Systems Inc. A123 Systems Inc. specializes in the development and production of lithium-ion batteries and energy storage systems for electrical vehicles. March of this year, Wanxiang Group announced that it has already invested $149 million to acquire the famous American plug-in hybrid electric vehicle manufacturer Fisker Automotive.
Wanxiang’s main structure of success is accomplished through "localization" and the idea that "managers are owners." Wanxiang America is central figure in "localization,” with only a small proportion of Chinese personnel. Wanxiang America’s headquarters, from its entrepreneurial start of six Chinese employees, has grown now to more than 900 employees, of which there are still only six Chinese employees. The rest of the employees are all local employees, which explains why a sense of corporate culture, as well as a sense of trust has been formed. The use of local professional managers, such as chief operating officers, to run local businesses let corporate executives, such as chief financial officers, directors, VP of sales and such become real owners. In addition, from the beginning of 2001, Wanxiang America has implemented a corporate package deal. These managers would now put part of profit into a separate fund, as a way to show that managers are now owners and have a stake in the business.
In summary, based on the impact of current developments in China's auto demand and the economic globalization, Chinese enterprises must travel from a manufacturing country to manufacturing powerhouse, ultimately laying out the global market. According to the success stories of Japan and

China, in developing in the U.S., these are the perfect examples for how China can easily travel this avenue to success.

**Chapter IV: Opportunities of Chinese auto parts enterprises going out

4.1. U.S. is a good investment environment today
**
America has undergone dramatic changes from globalization and the global economic crisis. From the end of 2009, the Obama administration began to revive American manufacturing by creating a national strategy to advance the world’s manufacturing base.
Due to various reasons, the revival of the U.S. manufacturing sector has not been performing nearly as exciting as originally. In particular, some so-called emerging industries (such as the digital revolution) have yet to bring an abundance of new industries or new companies to the United States. The United States has a unique technological advantage, but is lacking in capital. The debt-ridden federal government and the current situation in the United States results in a slow recovery in private investment.

According to a recent survey by ATKearny, the United States remains the world's most attractive country for foreign investment (China's second, Canada’s third, the UK’s fourth, and Brazil’s fifth). However, the attraction of foreign investment, especially in regards to the manufacturing sector, is still far from revitalizing the American economy. The reason that the economic growth is slow is due to outdated infrastructure, a complex immigration system, and higher corporate income tax. For this reason, the federal government to state governments and municipalities are all trying to attract investments, especially foreign investments. To create a better environment for foreign investment, together the Republicans and the Democrats are actively pushing the Congress to pass a "globally competitive tax reform," a "multi-country free trade agreement", and are "working in the United States Global Investment Act" with a series of bills to help attract more foreign investment.
The Obama administration is actively the first White House administration to push for investments. According to U.S. media, Obama has personally, on several occasions, been promoting investment. On October 31, 2013, Obama at the "SelectUSA Investment Summit,” in front of 60 countries and more than 1,000 business leaders concluded remarks telling them that "when you bet on American, that bet pays off."

May 20, 2014, Obama and his administration convened 10 of the world’s top companies and their senior executives to attend the economic summit. The purpose of the summit was to develop easier ways for those companies to invest factories in the US, thus attracting even more foreign companies
and investments to United States. The American local state governments are most clear on how important the state’s economy is in revitalizing the American economy as a whole. For these local state governments, attracting investment after the global economic crisis has become a crucial situation worth considering.

The global economic crisis was caused by the sub-prime mortgages in United States, which greatly impacted the U.S. housing market. Although the housing market has begun to recover, the current land prices and rental prices are still quite attractive. In addition, the United States has a considerable number of the world's top universities that have produced a large number of highly qualified personnel. More and more Chinese students are going to study at American universities, and a considerable amount of Chinese college graduates are coming out of these universities annually. This trend will continue for a period of time; coupled with the economic crisis there are also numerous technical personnel still looking for work. These rich human resources are very conducive incentives to invest in the United States.

Also worth mentioning is the climate of the American life and its social environment. Those Chinese people who have visited the United States, of which, the vast majorities agree that the nature and living environment are healthy, civilized, and especially suitable for living.

4.2. Opportunities arise when supply chains become longer after the economic crisis.
With the outbreak of the economic crisis sweeping the globe, America's auto industry resulted in an unprecedented downturn, the worst of situations being the auto parts industry. In this wave of the economic crisis, the global economic situation caused an enormous fall in demand for the automotive market. American Big Three auto companies, together with renowned Toyota and Volkswagen were all forced to adjust their global sales targets. In Detroit, also known as the "Motor City" experienced an unprecedented and stark winter with most private auto parts enterprises closing down. Detroit's economy entered into a new round of turmoil. July 18, 2013, this "Motor City" formally filed for bankruptcy protection, thus becoming the largest bankruptcy event in American municipal history. You should know that half a century ago, Detroit and its industrial workers were the aspiration of the United States; the "American Dream," at best. But after half a century, everything in Detroit gradually went to dust, becoming the most tragic city of the US. Following US’s 2014 auto industry recovery, Detroit has ushered in a new development opportunity. Yet still, after the economic crisis, the number of local auto parts enterprises has dropped. In addition, supply chains are becoming longer, so arising is the urgent
need for more new local manufacturers to respond to the North American auto parts shortage crisis. This is precisely the excellent investment opportunity for Chinese auto parts enterprises.

4.3. Strategic opportunity for suppliers regarding parts standardization
Between 1993 and 1994, in context of the automotive world economic crisis, prominent European company representatives have consistently set out to design standardized parts in order to control automobile manufacturing cost for the public. Since then they have launched their own platform strategy and have been developing so far. Parts standardization will help to: improve the efficiency of
vehicle development, shorten development cycles, reduce procurement costs, reduce quality risks, and reduce manufacturing costs for assembly processes and other OEMs. However, this large-scale standardization of parts will bring with is various risks. The standardization will need a lot of pre-market test verifications, designs, and more testing. This technology will need to control cost reductions as potential quality problems could factor into customer complaints. Once these standardized parts cause problems it will easily trigger a chain recalls. Parts standardization require suppliers to have R&D capabilities, quality parts, and product prices all have a certain competitive advantage to them, in turn creating a demand for new suppliers, as well as rare strategic supplier opportunities.

**4.4. Opportunities of the financial needs after the economic crisis **
During the global financial crisis, U.S. Congress decided to bailout the American auto giants: GM, Ford, and Chrysler, who were on the brink of bankruptcy. On the verge of bankruptcy, these auto giants
not only saw a crisis in the U.S., but also in the world’s automobile industry. Despite critical views of this bailout, the American auto industry finally ushered into signs of recovery in 2014, as did the world.

After the economic crisis in 2014, the American auto industry ushered into signs of recovery. However, the American auto industry’s demand for funds is still at large a difficulty. The current willingness of private capital investment in the United States automotive industry is still small. One example is US’s auto state governor Rick Snyder, whom since his inauguration in January 2011, has ordered to improve the business environment through a series of tax reforms and by launching a number of incentive programs. Up to today, he is also the only US governor visiting China every year to insist foreign investment. In mid-April of this year, Michigan Governor Snyder sent a senior vice president of his Economic Development Agency, Kevin Thomas Kerrigan to bring to line China’s gold.

As mentioned before, through the three decades of reform, the China’s economy has been in rapid and sustainable development: state-owned enterprises have pockets of money, private enterprises completed the primitive accumulation of capital, private enterprises have pockets of money as well. All of this goes in justifying the opportunity for Chinese parts enterprises to go out to the United States.

**4.5. Opportunities of Chinese automotive OEMs entering the U.S. **
In the new tide of going out, the Chinese automotive OEMs have become trend followers. China's automotive OEMs have one by one gone abroad, coming to the United States to expand their business.

They want to extend their reach into the most technologically advanced automotive countries in the world - the United States, in order to develop the company's new profit growth point.

Changan Automobile, in Plymouth, Michigan established a R&D center that will focus on chassis design and technology, which has become the United States foremost R&D center specializing in automotive chassis technology, including chassis performance development, design and manufacturing research processes.

Brilliance Auto, in Lansing, Michigan’s is providing the production of new lightweight engine mounting systems to General Motor’s Cadillac ATS site. Shanghai Automotive, its North American headquarters in Birmingham, a city surrounding Detroit, will focus on procurement, logistics, technology and engineering.

These OEMs have entered the United States and have brought unprecedented opportunities for the Chinese auto parts enterprises.

4.6. Breakthrough the U.S.
As we all know, the dream of Chinese auto companies is to enter the U.S. market. Geely, Brilliance, Great Wall, BYD, Chery and so have had several debuts in the Detroit and Los Angelos shows. However, under a variety of reasons, repeatedly none of these brands have walked into the car dealer's showroom, laminating that Chinese auto companies are still looking to breach the US market.

With China's current economic development, it is expected to overtake the United States this year, becoming the world's largest economy. Thus, Chinese auto companies entering the U.S. market is only a matter of time. Recently, in the global release of the film, "Transformers 4: Age of Extinction" Chinese auto companies saw the realization of their dream starting to be fulfilled.

Now, it seems that there are two paths to enter the U.S:
(1) Export China’s brand to the U.S. market
(2) Create local production and sales of Chinese brand cars in the U.S. – a.k.a "localization." If they really want to enter the U.S. market, "localization" will the ultimately be the choice. Japanese auto companies successfully achieving "localization" in the U.S. is the foremost example.

When the Chinese automotive OEMs began "localization" in the U.S., it provided the Chinese auto parts enterprises a very good opportunity to being “localization.” Chinese auto parts enterprises going to United States is not only the opportunity to provide parts and service to the "Big Three," but also an opportunity to provide parts and services for Chinese auto brands within the United States. "Today, if
you want to become a supplier for automotive manufacturers, it is necessary to put your footprints globally. Which means you have to have such an ability to locate production within the vicinity of large companies and provide them with the required parts. "

In summary, for those who currently have the acquired strength and is already either a supplier to China’s automotive OEMs or global brands, it is now time to consider going

Chapter V: The challenges that Chinese auto parts enterprises will face going out

Chinese auto companies and parts suppliers going abroad to invest in the United States is not an easy task to do and there will be many challenges ahead. There are linguistic, cultural, legal, institutional, as well as the many business model challenges that will arise.

5.1. Challenges with business management models
Currently, Chinese enterprises, especially private enterprises, will face a very big challenge with business management:

(A) Business management challenges:
a) For those enterprises who have already let their managers become part owners: If these enterprises have already entered the United States and there is real "localization." The enterprises will now need to overcome the challenge of letting the Americans become part owners.
b) For those enterprise who still have not yet allowed their managers become part of owners: This step is breakaway concept and will be a very big leap for previous management models, which requires the enterprises to have strategic vision, insight and courage.
Fortunately, we can find answers from current success stories of Chinese companies going out, the best example being Wanxiang Group.

(B) Customer relation challenges:
a) In China, the majority of our business sales strategy is to first establish and maintain customer relation goals, then by launching, at the appropriate time, the product, before considering product technology, quality and service.
b) In the U.S., companies’ sales strategy is based upon the product's core technology, excellent quality, good service, and then establishing long-term cooperation and mutual trust in customer relations.

Therefore, we must first change China's enterprise model through long-term and unremitting efforts to enhance product technology, quality, in accordance, with local standards, and only then, through
local customers and certification requirements by OEMs, will China’s enterprise have the authority to showcase high-quality, long-term, competitive and customer satisfied products.

5.2. Legal system challenges
The U.S. has sound rules of law, in which U.S.’s companies and people relatively abide by. Every action is in accordance with laws and regulations. If we, Chinese enterprises, wish to invest in the U.S., we must comply with the law. In addition, North American and European safety and environmental regulations are more stringent than ever, which may arise other "political considerations." If enterprises encounter various problems, they will need to pick the right legal weapons to safeguard their interests. In the U.S., we cannot always look for the "gray area" or play the "lucky ball" approach in solving business problems encountered in the law. Rather we have to use the law to regulate our own behavior.

In fact, these problems can be solved on U.S. soil or through the "localization" strategy, because local lawyers are very familiar with each state’s law and can provide the best solution for each company.

5.3. Challenges with language and culture
In the U.S., our Chinese entrepreneurs will face numerous language and culture shocks, of which the biggest challenge being for the entrepreneur. If, through their own efforts, the entrepreneurs can master English, he/she will slowly become familiar with the local culture quick. However, if you cannot
achieve this goal in a short period it will not be a big issue, because the hiring of local teams can help you solve all of these problem. Entrepreneurs need only to be “behind the scenes” and manage operation losses in a controlled manner. A Chinese metaphor used to describe this situation is through
the meaning of “运筹于帷幄之中,决胜于千里之外.” This describes how strategists would sit within a command tent outside the battle zone and devise strategies that will assure victory from a thousand miles away.

5.4. Challenges with industry norms
For business operations in the U.S., entrepreneurs are faced with differences in industry norms. In fact, we only need to compare the differences in norms between the two and continue to master and be familiar with the two. Secondly, you will need to make good use of local industry standards for business services. These problems can all be solved through the localization strategy.

**5.5. Challenges with anti-dumping **###
For entrepreneurs, they need to understand whether the product, at hand, is included in anti-dumping policies for both short-term and long-term policies. If you encounter company products that are included in the anti-dumping policies, you will need to make good use of political power and national industry organizations to help solve the problems you face. All in all, the process of Chinese enterprises entering the U.S. market has both opportunities and challenges. How to seize opportunities, meet
challenges, and turn those challenges into success, is the first objective in front of Chinese enterprises. In contrast, successful stories of foreign and Chinese companies provide us with valuable experiences and indicators of a way to move forward. Hence, Chinese enterprises can learn from previous experiences to resolve challenges and usher in new development opportunities.

Chapter VI: Discussion about the method for going out

In order to go out, the following models can be used:
1) Joint Ventures: 1984, the two auto giants, Toyota and GM, in California, jointly established a joint venture NUMMI (New United Motor Manufacturing Company). It is also the first U.S. joint venture car company. The company has produced the Toyota Corolla, Matrix, Tacoma models, as well as the Pontiac Vibe, etc., called to this day, a classical example beautiful Japanese and U.S. company cooperation.

2) Acquisition: The most typical cases relate to China’s Wanxiang Group. From 1999 to the present, Wanxiang America acquired left and right more than forty companies in the U.S. Wanxiang America’s development process is that of a series of acquisitions, which have built its way into U.S’s industrial chain and its current market position

3) Wholly-owned Plant or Technical Cooperation. Now it still seems that the cases of auto parts enterprises directly owning factories in the U.S. is limited, however, there is no shortage of pioneered businesses related to the automobile. Fuyao Glass Industry Group Co., Ltd. announced in 2013 that it would invest $200 million to set up a wholly owned "Fuyao Glass America Ltd. (tentative name)" in Ohio, constructing an automotive safety glass project.

These existing success stories explain to us that window of opportunity, to create service centers or R&D centers, in foreign countries, is a relatively safe and feasible process. The advantages of this process is very clear: 1) The beginning capital needed to invest is relatively small. 2) Using a service center as an advisor can help with gaining direct knowledge of how to penetrate the market, investment banks, and to understand the opportunities for joint ventures. 3) It can directly help to learn the latest trends in local technology. 4) It can start to help maintain a close relationship with local OEMs and customers, where, if there is an opportunity to join their initial innovation plans and through time that opportunity will mature to the point of possible entry. Overseas acquisition of Chinese auto parts enterprises, entering the international luxury market, participating in international competitions, and promoting development of China's auto parts industry is a leap-forward of great significance. No matter what form, the final recommendation is to find local professionals, such as consultants, financial institutions, investment banks, legal advisers and others to help you complete this transition. But, different teams have different compensation structures. With this regard, if you want to find a team that matches your need, you need to use a service window or research center that can help with preliminary research.

The industry executives believe that, while providing for China's domestic auto parts enterprises may be easy, entering a market with a majority of foreign controlled joint ventures is extremely difficult.
The best method is to go through the acquisition of foreign original suppliers to obtain that direct channel.

Summary

Concluding this paper’s opportunities and challenges, we will find that these issues will be faced with all car companies wishing to go overseas. However, we should also look to the advantages of China’s auto parts’ enterprises, which are more obvious today. We believe that the current investment opportunities in the U.S. are way more abundant than the challenges faced. We need to firmly seize this period in history that has given us these many new opportunities, but also to fully overcome these challenges and turn them into the driving force for our road ahead. Like Wanxiang Group’s "localization," "the manager is the owner," "domestic and foreign resources, grafting, transfer, exchange," and the success stories, reveal to us the wisdom that Chinese people can rely on. We can definitely create a world of our own in the U.S. Chinese auto parts enterprises are docking overseas with a greater extent and at deeper level. They are standing on a higher perspective to explore the international market and gain international resources. The future ahead is looking bright and step-by-step the road will be clearer. We have reason to believe that at this particular moment in history, our Chinese auto parts’ enterprises will fully tap the potential and comprehensively use their advantages to go abroad, in order to create a more brilliant tomorrow!