John Batchelor radio show
and Lou Ann Hammond discuss whether Malcolm Bricklin will sell “Made in China” cars at Walmart
When you are predicting the future, all you can do is predict the future.
“Made in China” is common in the United States and at some point, cars will join the host of other items that consumers purchase with that moniker on it. New York-based Visionary Vehicles LLC (VVLLC), headed by the entrepreneur and maverick, Malcolm Bricklin has been touting that will be the case as soon as 2007. Most folks agree that Chinese cars are coming to America and soon. That was until this week when two key people in the Visionary Vehicles group made a quick exit and have been more than vocal about their displeasure in Malcolm Bricklin and his ability to be the person to bring Chinese cars to the American market.
Chery Automobile Company is a government-owned Chinese automaker that was founded in 1997 and received its ISO/9001 certification in 2001 and it’s ISO/TS16949 certification in 2002. Chery is one of the fastest-growing companies in the burgeoning Chinese auto industry. According to Automotive Resources Asia, in China, Chinese car companies only own 19 percent of the market. Out of that 19 percent Chery owns 6.8 percent. The Chinese government recently gave Chery $610 million to expedite the process of exporting cars to America. They also awarded Chery with another $289 million for research and development in clean air and developing hybrids. Chery has teamed up with Bricklins VVLLC to exclusively import cars into the United States.
Chief Executive, Malcolm Bricklin, is known for selling Yugos and importing Fiat X1/9s (rebadged as Bertones). He also produced a futuristic sports cars bearing his name, the Bricklin SV-1, in New Brunswick 30 years ago. The province sank $23 million into the venture before Bricklin went bankrupt. According to fact file, “In 1958, Bricklin dropped out of the University of Florida and built his father’s Orlando, Florida building supply business into a franchised chain of Handyman stores. A number of the lawsuit’s from the franchises arose and Bricklin left the business has become a millionaire in the process. Handyman America Inc. soon went bankrupt.”
“In 1965, Bricklin started selling franchises for motor scooters that included some made by Fuji Heavy Industries, who also produced the tiny Subaru 360 automobile. Bricklin realized that the 360s lightweight (under 454 kg) allowed it to slip under the United States government’s safety regulations, and he and his partner, Harvey Lamm, formed Subaru of America, Inc. to sell Subaru franchises.”
“Sales went reasonably well until Consumer Reports magazine called the Subaru 360 the most dangerous car in the United States, causing sales to plunge. Bricklin was soon out of business, but managed to secure 1000 360s as part of his settlement, and attempted to franchise small race tracks where the 360s could be raced. He was soon sued by his financial backer for misappropriation of funds.”
VVLLC has enlisted Allen & Company as their financial advisors, not their investment backer. According to Bricklin, he wants the dealers to have an investment in VVLLC, requiring each dealer to put up $2 – $4 million each, depending on the territory. Top-end models, according to Bricklin, will sell on an average of $19,000 and have the styling, quality, and safety of a BMW, Mercedes or Jaguar.
Pierre Gagnon is the former North American executive of Mitsubishi. Gagnon left Mitsubishi to work with Bricklin as his President and Chief Operating Officer and the No. 2 executive at Visionary Vehicles. Andrew Stewart, the Vice President of franchise development, was brought onboard by Gagnon from Mitsubishi. When you can garner talent that is recognized by the industry it brings what was being touted as a “pie in the sky” dream into the realm of reality. In an about-face, Gagnon and Stewart both quit. According to Gagnon “I liked Malcolm, he was charismatic. I was impressed with Chery. Malcolm and I had a verbal-handshake agreement and I had signed the papers to work with him and got paid for one month. I resigned because Malcolm reneged on several agreements that affect my trust and on important commitments. It is not my intent to say anything negative, but I’m not going to be dishonest when I am asked.” According to Bricklin, “Gagnon was okay for Mitsubishi, but he wasn’t okay for a start-up and VVLLC is a start-up company.”
Since Gagnon and Stewart were going to work as dealer development the question remains, how many dealers does Bricklin have, what will be his distribution method? According to Bricklin, “Walmart was really interested in selling cars and contacted me personally, but I said no; cars are too personalized.” According to Peter Butterfield, CEO of KIA Motors, says that the distribution method for any start-up is the key to success. “When I came to Kia I did a business case on all start-ups and from 1950 there have been 34 brands that started and there are only 14 left that is not co-owned by someone else. An independent distribution system such as Walmart has a number of challenges. Kia as a whole would not want to take on another start-up. Unless you are a high-end brand you don’t start off as an exclusive franchise, but in order to be successful you have to have an exclusive dealership where people are focused on your brand.”
Bob Tasca IIIs family has been in the auto business for sixty years. They own the Ford, Lincoln-Mercury and Mazda conglomerate in Cranston, Rhode Island and a Lincoln-Mercury, Volvo dealership in Seekonk, Mass. Tasca went to China with Bricklin and about a dozen other dealers. According to Tasca, “Our family decided not to move forward with the venture. I don’t know any dealers that have signed with him (Bricklin).” Marc Stertz, Editor and Publisher of the National Automobile Dealers Association (NADA) magazine echos Mr. Tascas comments, “We have not heard of one single dealer that has signed on to sell VVLLCs cars.”
Questions still remain as to which cars will be brought over to the United States for sale. Bricklin is supposed to announce the first 25 dealers he has signed up in two weeks in a full-page ad.
In the land where copyrights and trademarks are not upheld Chinese companies can operate pretty much the way they want, but not so in the United States. The feud with General Motors has been ongoing since, allegedly, Chery copied the design of one of General Motors Daewoo vehicles. GM is currently in a legal battle with Chery over that allegation. General Motors is also threatening to sue if Bricklin brings vehicles over with the name Chery on them, claiming that Chery is too close to G.M.s Chevy name.
Entry-level compact sedan
Sport and luxury coupe
These vehicles will be designed by renowned European and Japanese designers, including Bertone and Pininfarina. Bricklin is still adamant that they are shooting for selling 250,000 cars in the first year. The first two will be a four-door passenger coupe that was shown at the Shanghai Auto show and won car of the show and a crossover 6-cyl, six-speed automatic all-wheel drive with a five-star rating from NHTSA.
Both will sell for about $19,000. Chery is expecting to have its first hybrid in China by 2006 and Bricklin expects a Chinese hybrid to be in the US by 2008. Bricklin wants to have 100 percent of his fleet be hybrids. Bricklin credit’s the hybrid issue with one of the reasons Maurice Strong, United Nations Under-Secretary-General, left the advisory board of Toyota Motor Corp. two weeks ago to join VVLLC.
Bricklins advisory team is as follows; AMBASSADOR WILLIAM J. Vanden HEUVEL – Chairman of Visionary Vehicles Management Board. Investor Vice Chairman of the World Federation of United Nations Associations; U.S. Deputy Permanent Representative to the United Nations; President of the Franklin & Eleanor Roosevelt Institute; Senior Advisor to Allen & Company; and Co-Chairman of the Council of American Ambassadors; 12-year Director of Time Warner
The HONORABLE MAURICE STRONG – Chairman of Visionary Vehicles Technology and Environmental Advisory Board, will develop a worldwide team of scientists, technology experts and environmental professionals, Investor United Nations Under-Secretary-General; Chairman of the Earth Council and the UN University of Peace; Advisor to the President of the World Bank; Director of World Economic Forum Foundation; Chairman, Technology Development, Inc.; Chairman of Petro Canada Power Corporation of Canada and Ontario Hydro; Board of Advisors of Toyota
ALLEN and COMPANY – Investment Banker, will coordinate and structure all fund-raising for Visionary Vehicles. Clients include Berkshire Hathaway (Warren Buffet), ABC/Capital Cities, Coca Cola, Disney, News Corporation (Rupert Murdoch), Seagrams, and Universal Studios.
GLOBE CAPITAL PARTNERS / GALAXACO – International Investment Bankers and China financial consultants to Visionary Vehicles.
PER ARNEBERGUnited Nations Under-Secretary-General – Co-Chairman Board of Directors Visionary Vehicles, will coordinate transportation of Chery vehicles from factory to North America, Major Investor Founder of Peraco Chartering Corporation and Bermuda-based FRAM Shipping, Ltd. Mr. Arneberg has been involved in joint ventures with N.Y.K., Japan; WILH. Whilhelmsen, Norway; Sig. Bergesen D.Y.; Lukoil Oil Co.; Fortum Oil and Gas Oy, Finland. Transporter of Toyota vehicles from Japan to North America and Yugo vehicles from Yugoslavia to North America. Has extensive worldwide operations experience in ship ownership and chartering.
RON HARBOUR – President of Harbour Consulting of Troy, Michigan. Harbour has been retained to assess the capability, capacity, and quality performance of the Chery manufacturing facilities in China. This task will be critical in ensuring Chery’s ability to deliver vehicles that can be competitive with current quality standards and in the volumes necessary to support the demand in North America. Harbour Consulting has a worldwide reputation for its work with auto manufacturers and their suppliers in improving quality, cost, and productivity. Harbour is well known for its annual assessment of auto industry manufacturing performance through The Harbour Report, involving plants worldwide. Harbour is supported in Asia by their new office in Bangkok, Thailand.
PILOT SYSTEMS, LLC – Detroit based Emissions and Safety Certification Experts, will handle all aspects of safety engineering and homologation for vehicles entering the U.S market. Clients include General Motors, Ford, Toyota, Daimler-Chrysler, Honda, Hyundai, and Yugo.
JOHN CAVANAGH – Board Member Visionary Vehicles, International construction expert, will serve as construction coordinator of the 250 Visionary Vehicles dealerships. Former Vice-Chairman of AMEC Construction Management, Inc.; President and COO of Morse Diesel International, Inc. Well-known projects include the SEARS Tower, New York Stock Exchange, New York’s Museum of Modern Art, Philip Morris Corporate Headquarters, Mount Sinai Medical Center, Terminal One and Four of New York’s JFK airport. He has served two terms as President of New York’s Building Trades Employers Association, Chairman of the Contractors Association of Greater New York, on the Board of Directors of the New York Building Congress, member of the New York Building Departments Site Safety Committee, is an industry representative of the New York Real Estate Board, member of the Board of Directors of the Regional Alliance for Small Minority and Women-Owned Contractors, Vice Chairman of the New York Building Foundation.
SWANKE, HAYDEN, CONNELL Ltd. – International Architectural Design Firm, will be designing Visionary Vehicles revolutionary self-standing dealer showrooms and accompanying facilities.
The downfall of Bricklin may be that he can’t get the distribution. Honda has just finished building a factory in Guangzhou, China near the southeast coast, for exports to Europe starting in late May or early June. Regulations bar multinationals from owning more than 50 percent of auto assembly joint ventures in China, even though that was supposed to change under the WTO.
Beijing authorities made an exception two years ago and allowed Honda to own two-thirds of the assembly plant just completed in Guangzhou after it promised to export all the cars produced in that factory to Europe. According to Automotive Resources Asia, Japan’s marketshare of China is 35.1 percent, with Guangzhou Honda owning 7.9 percent of all sales and Honda Corporation owning 8.7 percent of the 35.1 percent sales.
It wouldn’t be much of a stretch to think that Honda could go from producing in China and exporting to Europe to exporting to the United States. It would be the lowest wages paid anywhere in the manufacturing world, allowing them to charge less for their cars. Honda already has a distribution chain set up in the United States and it would give Honda better bargaining power in China.
Another obstacle, the words “made in China” would be taken out of the mix. Honda is a globally known company with known products. Don’t count Bricklin out, but count Honda in.