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GAC Fiat Chrysler Sales Company - All about Business

Date:10-26 08:46 Authour:He Lun

Auto Q&A No.55

After more than two years' preparations, the GAC Fiat Chrysler Sales Company is finally in operation now, and there is hardly any rumor about a power struggle among the shareholders. This is extremely rare in the sales channel integration between imported and locally produced cars and also very disappointing for the media that is fond of a power struggle between the Chinese and foreign shareholders in auto JV. What's the real story?

Q: The channel integration among GAC, Fiat and Chrysler is quiet and smooth, and the very few guesses about "infighting" and provocative rumors about HR arrangement cannot stand the first refute. The industry seems to have calmly accepted the fact that the GAC Fiat Chrysler Sales Company is "dominated by the foreign side", and nobody mentioned the issue of "manufactory". Why?

A: This may have something to do with Zheng Jie, president of Chrysler China Auto Sales Co Ltd, and the "foreign team" she leads. Zheng Jie is the first Chinese professional manager responsible for the China business of a multinational auto manufacturer. Although Chrysler China Auto Sales Co Ltd is a 100% foreign company, it has more local talents than JV and looks more like a Chinese-funded company because it doesn't have one single foreign employee.

It is this "Chinese team" that has brought Jeep, a brand that failed in China in the past, back to life again, and boosted Chrysler's sales volume in China from 20,000 units in 2010 to 128,000 in 2014. When such a successful and localized team is integrated with the sales team of a JV, the result doesn't look like a JV but more like a Chinese enterprise. If the media still want to make a fuss over the power struggle between the Chinese and foreign shareholders, it would be too far-fetched or ridiculous.

On the other hand, this also has something to do with GAC. Unlike other Chinese shareholders in auto JVs, GAC hasn't secretly fed the media with inside stories in order to put pressure on the foreign shareholder and utilize the public opinion to its own advantage. Instead, GAC has displayed prudence, pragmatism and a "business is business" attitude.

Q: But power struggle still exists. For instance, Zheng Jie, representative of the foreign side, takes full responsibility, while Chen Daohong, representative of the Chinese side, occupies a deputy position. Each shareholder assigns four people to be responsible for four different departments, so unlike the "double signature" system adopted by GAC Toyota and other auto JVs, each of the eight main functional departments of GAC Fiat Chrysler is under the charge of only one person. Generally speaking, the foreign side takes the lead. Why has GAC changed its mind on this point?

A: When GAC Toyota was founded ten years ago, the Japanese side lacked experience in selling cars in China and the Chinese side didn't have sales talents well versed in international marketing concepts and approaches. They were of equal strength and were highly complementary, so it was natural to adopt the double-signature system. Moreover, the auto market developed at a high speed at that time, products were in short supply, and competition wasn't so fierce, so the two sides had enough time and energy for running-in.

But the situation is different now. The foreign side has a complete and excellent marketing team as well as advantages in sales network and products, so it may be best for the Chinese side to play a minor role and utilize the foreign counterpart's quality resources to the largest extent. Besides, there is more supply than demand in the auto market today, and the competition has never been fiercer, so there is no time for the two shareholders to "take it slow" in a 50:50 management structure and HR arrangement. They have to get in the groove as quickly as possible and make fast and efficient responses to constant market changes. So GAC's choice today is well-reasoned.

As to the Chinese side's interests, which are related with the power struggle, there is a board of directors over Zheng Jie, and the board chairman Feng Xingya has successful and rich experience in auto JVs, so the media need not worry themselves about that.

In sum, the process and result of the sales channel integration of GAC, Fiat and Chrysler isn't filled with the topic of power struggle, but reflects the logic of market economy oriented by effective resource distribution. This may be the most "business-focused" and least "political" JV in the auto sales sector so far, and it demonstrates GAC's rationalism, pragmatism and confidence.

Q: Dongfeng Infiniti was founded last September when situation in the market was harsh, but it still adopted the "double signature" system, and it has turned out fine with a 35.6% year-on-year sales growth in 2015H1, the best performance among luxury car brands.

A: Dongfeng Infiniti is a special case. Dongfeng and Nissan once had a bad power struggle, which resulted in poor sales volume. Later the two shareholders learned a lesson and worked out the Outline of Joint Actions that is called the Basic Law of JV. It institutionally ensures the following consensus - all operation and management personnel in the JV, whether they are from Dongfeng or Nissan, no longer belong to their former company or represent the interests of their respective shareholders. They are employees of the JV and only represent the JV's interests, carry out the board of directors' decisions and work hard for the JV's development. All matters concerning the shareholders' interests shall be discussed and decided by the board of directors and shall not involve the operating level of the JV. Since then, Dongfeng Nissan has been enjoying exceptional sales performance and become the milch cow for Dongfeng (see "Dongfeng Infiniti - Who Calls the Shots?" and "How Do Auto JVs Step out of the 'Power Struggle' Dilemma").

After the unique Outline of Joint Actions was formulated, management personnel in Dongfeng Infiniti, whether they are from the Chinese or foreign side, all have a definite and unified conduct code, which is actually the code of conduct for a professional manager and it reflects the corporate culture formed on that basis. Therefore, although they adopt the "double signature" system, they have still achieved high operating efficiency. Of course this is also largely attributed to the competence and quality of relevant personnel.

Q: Is the new GAC Fiat Chrysler Sales Company able to bring the sinking Fiat back to life again?

A: Viaggio and OttimoZhiyue, two locally produced Fiat models, rank among the top in the competitor reputation list at Auto Home, and their pricesare competitive too, but they still suffer from poor sales volume due to the poor image left by old locally produced Fiat models. To change this situation, apart from marketing innovation and brand reshaping, what's most important is a new model with outstanding design, technology and quality that caters to the taste of Chinese consumers. This requires more investment and time.

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