Reviewed by Valerie Sartor
When Martin Posth took on the mission to manufacture the highest quality car in China he was 40 years old, comfortably ensconced in Germany working as personnel director of the Audi Management Board, and oblivious to the cultural challenges he would face. 1000 Days in Shanghai: The Story of Volkswagen, The First Chinese-German Car Factory (2008, John Wiley & Sons, English translation) is his immensely readable memoir.
Insightful, this first-hand account of an automotive biz journey recounts the metaphoric potholes and red lights he hit along the way building the VW Santana automobile factory. With 195 pages, 11 chapters, historic photographs, and astute tips for businessmen, this book is not only an easy read but a primer for foreign businessmen in China.
Posth moved with his wife and two daughters to Shanghai in September 1985, a time when living conditions, the now defunct foreigner currency, and rigid state owned business practices were the norm. True, China has advanced light years since then, but 1000 Days in Shanghai is "a historic document on the Open Door Policy for foreign investors" according to Prof. Xu Kuangdi, former Mayor of Shanghai (1995-2001). I also concur with his illustrious opinion, and urge any potential entrepreneurs and expats itching to do business in contemporary China to read the book.
I say this because in 2004 I moved to China, and settled in Xinjiang, where Santanas prevailed as the hardiest cars zooming along endless desert roadways. Nowadays, living in Beijing I see that Audis have taken precedence. Currently GM is king of the China road regarding production figures. The once ubiquitous Flying Pigeon bikes are being replaced by all sorts of vehicles: Hondas, Toyotas, Buicks, to name a few. Even BMW's and Mercedes sports cars cater to the upscale Chinese consumers.
And consume they do. China now has the second largest and fastest growing car market in the world, trailing the US. Some Beijingers will tell you they feel nostalgic about the decreasing numbers of bicycles and angry over the increasing carbon emission from cars, but many experts are betting that China will eventually become the global leader in automobiles. Already Beijing has more millionaire residents than any other city. Moreover, China boasts more mobile phone and Internet users than any other country in the world.
Posth's intimate narrative gives anyone interested in China and business perspective a jolt. He starts by recounting automotive history and vividly depicts how fast and how far the country has modernized. The first Chinese-German cooperative car manufacturing venture began in 1936, when Daimler Benz built trucks in Shanghai at the First Automobile Works (FAW). In 1953 the Soviets stepped in to cooperate with the Chinese in Changchun and built transport vehicles, creating the largest automobile factory in the world at that time. In 1959 STAC, a state operated enterprise, began manufacturing the "Phoenix" (Feng Huan), a vehicle modeled after the Mercedes. In the 1960's STAC built the famous "Shanghai Sedan", a business privately operated by the city of Shanghai. Later, in 1969, the Second Automobile Works (SAW) started up outside Wuhan in a city called Shiyan.
Fast forward to 1978. Minister of Machine Building Chou and his entourage were exploring the West as part of Deng Xiaoping's Open Door Policy. Minister Chou spontaneously dropped in, on foot no less, to see the VW Sales Director Dr. Werner P. Schmidt.
The Chinese needed cars and they viewed automobiles as appropriate symbols of a modern economy. Poor sighted Japanese and American executives rejected tentative Chinese overtures for cooperative ventures but the Germans leapt for it, astutely recognizing China as the automobile market for the 21st century. They offered to build cars for internal use in China and to export some engines for external use in the West. This strategy would create an equal balance of foreign exchange payment in the long term. Together with the Germans the Chinese signed the first equity joint venture with shared capital and management responsibilities in 1984. This historic opportunity, the Shanghai VW Automotive Company, Ltd., became the first joint venture between Chinese and Westerners in machine building.
Enter Martin Posth, a man who did not initially want the job of making Santanas. Luckily he was the ideal foreign expert because his specialty is in human relations rather than working as a controller; evidence shows that successful joint venture collaboration in China is determined by human interaction, not engineering. In fact, over 80 percent of the joint ventures between foreigners and Chinese fail, not from poor funding or bureaucratic snafus, but because of poor cooperation and mutual intercultural communication.
The situation was not good in September 1985 when Posth, his family, and his German team arrived in Shanghai. Only two, as opposed to the European quota of 1000, Santana cars were being assembled daily. The auto factory in Anting was below standard, from the toilets to assembly line methods. No one had any experience doing business with the Chinese.
Posth's candid and pragmatic memoir/manual points out the keys to his success. He stresses that it is important to adopt an "imaginative approach" and to pay attention to Chinese cultural nuances. For example, the Chinese make long, elaborate speeches, but they are not simply ceremonial: foreign businessmen can learn something about the state of a mutual relationship by paying close attention. All his personal reflections of this sort are tempered with great sensitivity and deep respect for the spirit of the Chinese people.
Posth encountered many growing pains and problems. Some required blind eyes and diplomatic moves. For example, mercury was found in the automotive paint – Posth raised a hazard alarm. When the paint mysteriously disappeared, dumped into a nearby river, he could do nothing; so he dropped it. Other challenges appeared. Building equipment and materials seeped out of his factory to a neighboring SOE that had been set up as a rival. Secrets, technology and great workers also emigrated to the competitor.
Early on he faced the need for substantial and unexpected capital to train the Chinese workforce on all levels. Determined, Posth convinced his bosses in Germany to give him the funding to do this. It was a good investment. The Chinese more than lived up to their half of the deal; the Germans found them amazing, dexterous and eager to learn.
Incidentally, Posth writes that Chinese girls in automobile factories are the best workers in the world. VW training has since become an iconic role model for all joint ventures.
Other problems: contracts were breached. During his tenure in Shanghai the Chinese also started to push him to manufacture Audis rather than Santanas, changing the deal entirely. He stuck to the Santana, a "rock-solid, middle class car." Cost-of-goods were always higher for the "long noses" than for the natives, and his Chinese managers initially had a state directed economy mentality. Waste and lack of motivation was rife. Shipping parts went missing. Despite these troubles Posth persevered. He felt that once VW became a credible success these problems would fade away.
Foreign competition also appeared over time. Citroen opened a factory in 1992 and Beijing Jeep in 1984, but until recently none were as successful as his Santana factory.
His own German engineers were sometimes too direct and steadfastly loyal to the home office in Germany. In the book he states "our biggest problem was not the Chinese, but frustrated Germans." They also cost 200 times the salary of a Chinese worker, thus creating further resentment.
The Chinese themselves seemed hesitant to take personal responsibility for their actions. To combat this and to stimulate employees at all levels he instigated a performance oriented remuneration system to get workers more involved.
Posth recommends in his book that foreign businessmen do as the Romans do: build their own guan xi. He admonishes them to never rely solely on the authorities in the province where their business is located. Instead, establish contacts at all levels: in Beijing, in the principality, and up the bureaucratic ladder.
The Chinese have a saying regarding joint ventures: "We sleep in the same bed but do we have the same dream?" Posth realized that he must create a workforce that was united in a vision and had a mission. In this advice packed book he advocates good nerves, the right arguments, patience, and endurance to deal with the miasma of cross cultural challenges.
After three years Posth returned to Germany to serve on the Volkswagen management board but he returned to China heralding the Asia Pacific business of the entire Volkswagen Group in the 1990s. The Chinese authorities deemed him an "Honorary Citizen of Shanghai" in 1997. Rightly so: under his supervision automobile production increased from two vehicles per day to an annual capacity of 60,000 units. Volkswagen now puts out 1.08 million units in China per year.
(China.org.cn January 23, 2009)