Return to 1958 and build a century-old giant

Chapter 855 Cooperation on the Automobile Project

Bao Yugang added, "I can also place an order for five ships with a capacity of over 1000 TEU."

Although the shipping market is in a major downturn, he and Yang Wendong have also discussed that the container market still has great potential for the future. Even with the shipping crisis, in order to stabilize the market, it is still necessary to control shipping routes, so a sufficient number of ships are still needed.
The shipping industry is different from the real estate industry. The real estate industry can stop when it encounters a crisis and resume operations after the crisis recovers, but shipping routes cannot be stopped. Even if it is not profitable or even at a loss, the routes must be maintained and cooperation with customers must continue. Otherwise, if someone else steals the business, it will be impossible to get it back later.

Furthermore, placing orders domestically is primarily driven by their own personal desires, and as for the price, it is certainly much cheaper than overseas.

Of course, the risk here is quality, since the products have never been sold in overseas markets before.

"Okay, then we'll report this matter immediately," Director Wang and the others replied promptly.
In fact, they would have needed to develop container ships with a capacity of more than 1000 TEU, but they weren't in such a hurry. Now that they have 10 orders as a guarantee, they have a strong motivation to develop the ships, and they can also get some advance payments in terms of funding.

However, there are also risks; if something goes wrong, the compensation costs for so many ships would be staggering.
But doing business always involves risks, especially in manufacturing industries that involve safety. If a ship or a plane crashes, it becomes major international news. But if you want to work in this industry, you have to take the risks.

Yang Wendong smiled and said, "Okay, then Bao Sheng and I will arrange for someone to come here to discuss this matter."

He and Bao Yugang only made the decision; subsequent price negotiations, delivery time negotiations, and so on were handled by his professional team.

Director Wang smiled and said, "No problem, I welcome the Hong Kong team anytime."

The meeting went fairly well; we secured a large order domestically, although it was a future order.

In Hong Kong, there is no need to rush to buy ships now, and there is no need to buy ordinary cargo ships that are bound to lose money. Instead, container ships that can be profitable in the future and have high market demand were purchased.

We've achieved the result we wanted.

That afternoon, Yang Wendong and Bao Yugang were taken by people from the Sixth Ministry of Machinery Industry to their exhibition hall to see the history of shipbuilding development in the inland areas over the years. From the 1950s to the present, China has gradually developed from small boats on the river to cargo ships of 10,000 tons, and has overcome the technical challenges step by step.

The sudden emergence of the container industry in the international market meant that the domestically developed cargo ship technology was rendered obsolete, forcing China to start all over again.
In the evening, Bao Yugang and Yang Wendong went to a Peking duck restaurant called Quanjude in Beijing, specifically to savor its deliciousness.

"This roast duck tastes great," Bao Yugang praised.

Yang Wendong said, "Yes, the roast duck in Hong Kong is not bad either, but the taste is still different from that here."

This era may not have seen industrialized production of roast duck yet, and roast duck likely still has a large artificial component. In terms of taste, it feels much better than when Yang Wendong ate it in Yanjing in his previous life.
After eating for a while, Bao Yugang said, "Mr. Yang, your method today is really good. It solved the problem in one go and it is also beneficial to the mainland. You are amazing. No wonder you have your wealth and status today."

"Haha, you flatter me. I just hope that the cooperation will be beneficial to both parties," Yang Wendong said with a smile.

Historically, Bao Yugang bought four cargo ships, which inevitably resulted in losses. This was a typical case of him subsidizing the mainland with his own money.

In principle, there's no problem; that's the kind of person Bao Yugang is. But this kind of cooperation model can't last long, since no matter how rich Bao Yugang is, he can't keep subsidizing people indefinitely.

“Hmm,” Bao Yugang said, “The matter with the Sixth Ministry of Machine Building is finished. I’ll go talk to the people in Yanjing City about the hotel tomorrow. It should be over soon. What are your plans for Yang Sheng?”

“I still have a lot of things to do here. Besides the cars, I might stay in Yanjing for a few more days to visit some of the major factories here.” After Yang Wendong finished speaking, he looked at Bao Yugang and asked, “Mr. Bao, are you planning to go back first? That’s fine, I’ll arrange a plane to send you back first.”

“No need. I plan to go back to NB City first, which is my ancestral home. I want to go back and take a look.” Bao Yugang smiled and said, “I won’t take your plane. I plan to take the train and enjoy the scenery along the way.”

Yang Wendong laughed and said, "That's fine too. Taking the train is quite interesting."

Actually, the old green trains of this era were not comfortable to ride. They were slow, stuffy, and crowded. However, people of their status naturally had special compartments. The comfort level might not be as good as their own private planes, but they could enjoy the scenery along the way by train.

In my previous life in mainland China, after the high-speed rail came out, unless you were thousands of miles away, taking the high-speed rail was much better.

Bao Yugang laughed and said, "Alright, let's have a little. This Moutai tastes pretty good, haha."

"Okay." Yang Wendong also raised his small wine glass;

He doesn't actually like drinking baijiu very much, but he prefers the high-end kind. People like Bao Yugang, on the other hand, really enjoy drinking it, so he naturally joins in a little.

Fortunately, everyone understands that alcohol is just for entertainment, and there's generally no pressure to drink a lot; it's up to personal preference.

The next day, Yang Wendong got up early and took a motorcade to the headquarters of the First Ministry of Machine Building: Sanlihe Road, Yanjing.
The two most important things I did during this trip to Yenching were the university—apart from site selection, everything else needed to be agreed upon—and the automotive cooperation.
In the future, if the mainland's automotive industry becomes number one in the world, I won't even dream of reaching the level of Volkswagen; I'd be perfectly content with just being a second-tier player.

It wasn't that they lacked ambition, but rather that the technological barriers in the era of gasoline-powered cars were too high. They couldn't acquire top-tier automakers, and second-tier brands found it extremely difficult to catch up with the leading ones. Historically, only Hyundai, backed by the entire South Korean and American governments, could be considered truly successful.
Even in China, a country known for its industrial infrastructure development, it couldn't catch up with Western brands in the field of gasoline-powered vehicles. It was only through electric vehicles that it was able to overtake them.

Of course, with only a Mini currently in hand, it's impossible to achieve any phenomenal success. However, there might be opportunities to acquire other brands in the future, and perhaps the chances will be greater. But what brands to acquire depends on future opportunities. In this industry, money often doesn't guarantee acquisitions.

Soon, under the guidance of relevant personnel, Yang Wendong met with the relevant leaders of the First Ministry of Machine Building and was introduced to them one by one.
The leader of the First Ministry of Machine Building this time was a bureau chief surnamed Zhou;
The group first visited the historical exhibition of the Ministry of Machine Building, and then went to a conference room on the third floor. At this time, Beijing didn't have many tall buildings; most department offices weren't very tall, but they were quite large. After a brief exchange of pleasantries, they quickly got down to business. Director Zhou said, "Mr. Yang, we know you've bought a car brand in England, so we'd like to ask if you'd be interested in cooperating with us?"

"How can we cooperate?" Yang Wendong asked.

He had already agreed with the top leader to cooperate, but how to cooperate was still to be discussed.

Director Zhou said, "Mr. Yang, are you aware that in 1978, Thomas Murphy, the CEO of General Motors, came to the mainland and discussed a cooperation plan with us, which was a joint investment by both parties with a ratio of 51% to 49%, and your side would hold 49%?"

In other aspects, that is…

Yang Wendong listened attentively. This set of content was actually the basic model of cooperation between foreign and foreign automotive industries in his previous life. It was not until the rise of the mainland automotive industry that the restrictions on shareholding were lifted. Therefore, there was nothing to discuss about this set of content, and the proportion could not be changed.

But for foreign automakers, it doesn't really matter, because even if they only hold 49% of the shares, they still probably get the vast majority of the profits, around 8%. The joint venture partners on the mainland side can only get the scraps.
The root cause is that the technology is in the hands of foreign companies. The rights to vehicle models, patents, and the designation of overseas suppliers are all held by foreign companies. Even replacing a single screw in a joint venture car requires the approval of the overseas headquarters.
After a while, once Director Zhou had explained the general terms, Yang Wendong did not immediately agree. Instead, he said, "I understand the general terms, but there are many issues involved, and we still need to discuss the specifics."

Historically, the negotiations between Volkswagen and the mainland took nearly six years and involved hundreds of rounds of talks before a final agreement was reached. It is conceivable that such cooperation would involve too many aspects. Even the boss, Yang Wendong, was not very knowledgeable about many technical and quality aspects and needed professional consultation.

"Of course, what I'm talking about today is just a framework," Director Zhou said with a smile. "I hope we can introduce a foreign car model as soon as possible and produce it domestically."

"Well, have you decided which Mini model to introduce?" Yang Wendong asked again.
Don't be fooled by the fact that Mini is just a small brand with annual sales of 47000 vehicles; it currently has six models.

Director Zhou said, "We'd like to introduce the Mini 1000 model. This model is primarily designed for urban commuting, and its power isn't bad either. It has good balance, and it's exactly the kind of small car we need."

Since the domestic side wanted to import foreign cars, it naturally investigated many foreign brands and even imported a lot of models in the early days.

After Yang Wendong acquired Mini, the Mini brand came into the domestic spotlight, so he imported several cars and conducted driving tests.

The comfort level of this small car is certainly not as good as that of a mid-to-large car, but nowadays, people in China don't pursue high comfort levels. It's good enough to have a car to drive. You know, many government leaders still ride bicycles to work. Even the worst four-wheeled car is much better than a two-wheeled one.

Mini models are relatively small and fuel-efficient, but after testing, it was found that the smallest model was not very convenient on some roads in China. Perhaps this is because Chinese roads are not as good as those in the West. So after discussion, they tried to introduce the more powerful Mini 1000.

Actually, Volkswagen and Toyota also have this type of small car, and they even sell better than Mini. It's just that negotiating with these big companies is too difficult. Since Mini is now owned by Chinese people, it's easier to negotiate.

"The 1000 model is indeed a good choice," Yang Wendong nodded.

Although he wasn't very knowledgeable about cars, he was familiar with several models produced by his own company.

The mini1000 is currently the most powerful mini model, with 45 horsepower. It may not seem like much, but the car itself is small, so it's enough.

Of course, in mainland China, if you are driving across cities, you may not be able to handle it if you encounter bad dirt roads. There is nothing that can be done about it. After all, Mini is mainly marketed as a grocery-getter for Westerners. It is fine to drive in cities in China, but it is inconvenient to drive across cities.

But most people drive their cars within a city, so Mini can focus on that market. For long-distance travel, the Santana can take care of that, or they can acquire other brands and introduce other models later.

The most important thing now is to reach a cooperation agreement so that Mini becomes the first car company to introduce it to the mainland. This alone would be a historic achievement, and the earlier it enters the mainland market, the more brand awareness it can gain.

Historically, Jeep and Santana were the first cars to enter the mainland market. In the 90s, these two cars were incredibly famous. If Jeep hadn't been stagnant for so long and made some intolerable mistakes, it would have been able to gain a stable market share in the new century.

"That's good." Director Zhou paused, then said, "Mr. Yang, there's another big problem, one that we can't reach an agreement with many international car companies on: the issue of foreign exchange balance."

“I know about this,” Yang Wendong nodded and said, “You may not know, but I have nearly 1000 car retail stores in Southeast Asia. Once the Mini cars are produced in mainland China, they can be exported as long as there are no quality issues.”

I also plan to seriously operate my own car brand in the Southeast Asian market. This way, I'll have sales both domestically and internationally, naturally balancing my foreign exchange earnings.

The foreign exchange balancing policy is one of the most troublesome policies for foreign companies since China's reform and opening up.
In other words, any company investing in the mainland must ensure that it does not spend the country's foreign exchange reserves while selling its products domestically.

There are two approaches: either you nationalize all production and source everything domestically, which would naturally save foreign exchange, or you import foreign components while also selling some finished products abroad.

This is precisely why many foreign companies have given up on building factories in China; they come to the mainland market to make money domestically.

But China is already short of foreign exchange, to the point that it doesn't even have enough for food, education, and infrastructure. How could it possibly agree to let foreign companies invest there consume its foreign exchange reserves?

The SAIC Volkswagen project has been discussed for many years and many times, and this is also a big part of it.

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(End of this chapter)