Chinese buy into Cadillac

SHANGHAI — Elvis Presley is not lost on the Chinese.

At the biggest-selling Cadillac dealership in China, customers react to the brand’s image the way Cadillac hopes customers everywhere will. Famous names in imposing silver lettering adorn a “wall of honor” at Shanghai Brilliance Hutong Auto Sales Co. There is Marilyn Monroe, Muhammad Ali, Cindy Crawford, Bar-ack Obama, Queen Elizabeth II and, of course, one of history’s most famous Cadillac customers — Elvis.

It is a message the brand hopes hits home with China’s uninitiated, yet ever status-conscious customer base: People who own, or are at least chauffeured in, a Cadillac are part of an elite 115-year-old club.

“Cadillac is associated with historical figures like U.S. presidents,” declares 40-year-old customer He Zhenyu, an e-commerce executive who was among the first in China to snap up Cadillac’s new CT6 flagship sedan last year. “Cadillac represents my individuality. The culture is the deal sealer.”

That Chinese shoppers buy into Cadillac’s heritage is one of many things going right for the U.S. luxury brand in the world’s biggest market.

Cadillac sales are booming; its average customer age is a sprightly 30 years; the premium segment in general is poised to explode; and thanks to an assembly plant that opened just last year, Cadillac is now flush with local capacity to feed the growing market.

Buick playbook

General Motors is deftly repeating its success in restoring Buick a few years ago: Take a long-in-the-tooth brand that is losing relevance in the U.S. and give it new life halfway around the world by leveraging its heritage. Today in China, locals still respect Buick as the brand of choice for the country’s first president, Sun Yat-sen, as well as China’s last emperor, Pu Yi. China is now Buick’s biggest market.

Cadillac Chief Marketing Officer Uwe Ellinghaus believes the same will happen with Cadillac over the next five years.

It is already trending that way. Cadillac sold more cars in China than in the U.S. last December. And China sales surged 90 percent in the first quarter of 2017 to about 39,400 vehicles, GM says.

A critical piece of the China breakout plan fell into place last year when GM opened a plant in Shanghai dedicated to churning out Caddys.

GM’s second-newest assembly plant worldwide, the Cadillac factory showcases the company’s most modern production engineering. Robots rule, with zero human welding in the body shop and parts being shuttled between sparsely populated workstations by a fleet of automated vehicles.

The factory makes the CT6, CT6 Plug-In, XT5 crossover and Buick GL8 MPV. It began exporting the CT6 Plug-In to the United States this year, but the other products all go to Chinese showrooms.

By localizing production, Cadillac can duck China’s 25 percent import tariff — an absolute precondition for taking on the Germans. Known collectively in China as ABB, short for Audi, Benz and BMW, the Germans scooped up early market share by beating Cadillac to China with local factories.

Paul Buetow, GM’s executive director for manufacturing in China, said the Shanghai plant marks a turning point in what could soon be Cadillac’s biggest profit center.

“It was absolutely critical,” Buetow said of GM’s decision to go local with Cadillac. “We can make mistakes in smaller markets, but if we make mistakes here, it’s a big issue.”

Room to grow

The stakes are high due to the Chinese market’s incredible size and burgeoning wealth.

Indeed, it is China that is now driving Cadillac toward record global sales. Worldwide volume rose 11 percent to 309,000 vehicles in 2016, Cadillac’s highest since 1986 — and approaching its all-time high of 360,000 vehicles in 1980.

In the 1980s, almost all Cadillac sales came from the U.S. Today, more than a third comes from China. China sales surged 45 percent to 116,000 last year, while U.S. sales fell 3 percent to 170,006 vehicles.

The market in China could play to Cadillac’s favor for a long time.

The luxury segment accounts for around 9 percent of the Chinese auto market, said Andreas Schaaf, general director for Cadillac in China. But the luxury segment is expected to expand to as much as 15 percent — on par with U.S. penetration — in the next 10 years.

Between 2020 and 2025, annual luxury-segment sales in China could top 4 million vehicles, from nearly 600,000 now. In the next three years, Cadillac plans to open 100 dealerships to position itself for the growth, on top of the 180 it already has.

Demographic trends are fanning the optimism.

Cadillac’s average customer in China is 30 years old; the average U.S. customer is over 50. And about 40 percent of Cadillac buyers are first-time car owners, Schaaf said.

Chasing ABB

Cadillac’s China sales surged in 2016, thanks to the launch of two models, the CT6 flagship sedan and the XT5 midsize crossover. With no new nameplates planned for 2017 except the CT6 Plug-In derivative, Cadillac isn’t expecting a repeat performance, Schaaf said. But its sales are still expected to notch an impressive double-digit percentage increase in China this year as the brand rides the rising tide of overall luxury-segment sales, he said.

“We are on the path to get the brand up to the top in China,” said Schaaf, who, like Ellinghaus, came to Cadillac after working at rival BMW. “We have the top three Germans in mind.”

GM built in plenty of room for expansion at the new Cadillac factory. It is operating at about half of its annual capacity of 160,000 units. Buetow says it will reach full output in two years.

The plant’s highly flexible line can run six body styles at the same time.

But Cadillac has a long way to go to catch up with the ABB competition. Mercedes-Benz sold 472,844 vehicles in China in 2016, more than four times Cadillac’s tally. BMW sold 516,355, and Audi sold 591,554.

While chasing the prestige of the Germans, Cadillac faces the balancing act of standing out as something different but equal, says James Chao, an auto analyst at IHS Markit.

“In China, they might be behind, but they are quickly catching up. The Chinese consumer wants to stand out among luxury buyers, and Cadillac offers a way to do that,” Chao said. “But are they competing from a brand standpoint with the Germans? It’s a question mark.”


With plenty of young, first-time buyers, Cadillac hopes its heritage message makes a lasting first impression. At Shanghai Brilliance Hutong, it clearly has.

Siren Zhou, a 28-year-old English teacher, got her white long-wheelbase ATS sedan last year as a wedding present from her father. It beats her old Volkswagen Polo hands down, she says.

Her friends are impressed, she says. They see it on par with those prized ABB nameplates. And when it’s time to buy her next car, Zhou has already decided what it will be: an XT5 crossover.

“Maybe we’ll have a baby,” she said, “so we’ll need a bigger one.”

Ford’s Hinrichs on how to improve NAFTA

DETROIT — Ford Motor Co. believes a modernization of the North American Free Trade Agreement should include protections against currency manipulation and a homologation of standards among the region’s three countries.

Speaking to Automotive News, Joe Hinrichs, Ford’s president of the Americas, said if those features are addressed in an update of the 23-year-old pact among the U.S., Canada and Mexico, NAFTA could be an example for future trade deals. It was one of the first times Ford has hinted at what specific updates it wants out of the looming renegotiation.

“We can, as a country and region, provide some good templates and examples for the future of trade agreements beyond the NAFTA region,” he said. “I think, in the end, the people involved know what’s at stake here and we’ll clearly end up somewhere that will make sense for the U.S. and the industry.”

President Donald Trump last week said he would renegotiate the agreement with Canada and Mexico, walking back previous reports that he would pull out of the deal.

“We don’t know how it will play out,” Hinrichs said. “It’s our belief — and I think the industry’s belief — that the integration of the North American auto business has certainly served the North American continent well relative to its competitiveness vs. the rest of the world, and that’s important for all of us to remember.”

Critics, including Trump, argue that NAFTA has led to job losses in the U.S. as automakers have invested in Mexico because of its low labor costs. By 2018, Ford will make nearly all of its cars in Mexico, while it has reserved U.S. plants for its higher-margin light trucks.

Ford, which was outspoken in calling for currency manipulation protections in the now-dead Trans-Pacific Partnership, said those protections are necessary in any update to NAFTA, even though it isn’t suspicious of the U.S.’s two partners.

“Traditionally we don’t see the Canadian dollar or Mexico peso being manipulated by the government, but we believe trade agreements should incorporate mechanisms around currency manipulation and the like,” Hinrichs said.

A homologation of safety and other vehicle standards would save car companies time and money, he said.

GM, like Ford, is in favor of improving the trade deal, CFO Chuck Stevens said last week.

“We want a balanced playing field,” he said.

Stevens said GM supports simplifying the deal’s local-content and origination rules. If Trump changes NAFTA in a way that increases the cost of imported parts or vehicles, “we’re hopeful there would be a period of transition so we can adjust to it,” Stevens said.

Trump must give Congress 90 days’ notice if he plans to renegotiate the deal. Commerce Secretary Wilbur Ross said last week the administration is working with lawmakers to kick-start renegotiations.

“The most important thing in the context of it all, we need a healthy auto industry in North America and of course the United States to support the economy and jobs,” Hinrichs said. “We want to make sure, in the end, that’s what we get.”

Nick Bunkley contributed to this report.

Mann plots a U.S. revival for Mitsubishi

TOKYO — Six months after taking operating control of Mitsubishi Motors Corp., Trevor Mann has put the carmaker back onto a profit trajectory.

Mann may also consider using Nissan Motor Co.’s products and North American factory capacity to revive Mitsu-bishi’s U.S. fortunes.

Mitsubishi was bracing for its first operating loss in more than a decade when Mann became COO in November. But within three months, he cut purchasing costs and ramped up savings by combining efforts with Nissan.

Mitsubishi instead now expects to show a full-year profit for the fiscal year that ended March 31, Mann says.

The British-born Mann stepped into Mitsubishi’s beleaguered operations last year at the direction of Nissan’s then-CEO Carlos Ghosn after Nissan acquired a controlling 34 percent interest.

In an interview, Mann said that specific plans for Mitsubishi’s future are being worked out. But he said the United States, China and Southeast Asia would be the main drivers of its recovery.

The Nissan partnership gives Mitsubishi new latitude to undertake plans that would have been impossible for the cash-strapped automaker acting alone. Mann said Mitsubishi may examine new vehicles such as a sedan or pickup for the U.S. The carmaker may also re-establish a factory footprint in North America, after pulling the plug on its only U.S. assembly plant last year.

Mann also wants to expand Mitsubishi’s U.S. dealer network to stoke sales. The brand has 362 U.S. franchises.

“We need to start to grow. We need to start to improve our network,” he said, adding that Mitsubishi will consider a range of possibilities. “We can reopen many things.”

Known inside Nissan as a production and cost-control guru, Mann is directing a contingent of Nissan executives dispatched by Ghosn to turn Mitsubishi around. Ghosn is now chairman of Nissan and Mitsubishi.

Mann said Mitsubishi will unveil its blueprint for rebuilding in September or October, coinciding with the release of midterm business plans by alliance partners Nissan and Renault SA.

The strategy is not in concrete, but Mann forecasts a 20 percent increase in U.S. sales for the fiscal year ending March 31, 2018. That would bring Mitsubishi to about 120,000 vehicles. The U.S. was Mitsubishi’s single biggest market last year.

Sales will get a lift from some new products, including the arrival this year of the Outlander PHEV plug-in hybrid crossover and the Eclipse Cross compact crossover.

U.S. ambitions

But Mitsubishi will be thin on other fresh offerings for the near term, Mann warned.

The key to pushing U.S. sales higher, he said, will be taking advantage of Mitsubishi’s lineup of crossovers and all-wheel-drive products amid booming demand for the segment.

“The answer to your prayers is not just adding nameplates,” Mann, 56, said by phone from Bekasi, Indonesia, where he was opening a Mitsubishi plant that had been planned before the merger with Nissan. “You’ve got to make sure the nameplates you’ve got are working for you. And we’ve got scope for improvement.”

Further ahead in the U.S., Mitsubishi could tap Nissan or Renault for help covering the sedan segment, Mann said. Mitsubishi may also consider a pickup, possibly on a Nissan platform.

“It’s something that we should look at,” he said. “As we go forward and start to have common platforms, an alliance pickup platform would be quite an appropriate thing for us to do.”

Mitsubishi may also consider North American manufacturing again, possibly through a Nissan plant. “One of the things that we have to start looking at is perhaps further industrialization,” he said. “We don’t have a plant in the U.S. anymore. Maybe using Nissan’s capacity.”

Mitsubishi shuttered its only North American assembly plant last year in Normal, Ill., making the Japanese automaker purely an import player and more exposed to currency swings.

Mitsubishi took a tumble last year after admitting it cheated on fuel-economy ratings for several nameplates sold in Japan. The scandal opened the door for Nissan to step in.

Mann’s fixes are coming straight out of Ghosn’s playbook.

As Ghosn did when he arrived from Renault to revive Nissan in 1999, Mann is rolling out dramatic cost cuts and seeking savings with the bigger partner. The rapid action put Mitsubishi on the path toward a slim ¥1 billion ($9.1 million) operating profit in the fiscal year ended March 31.

Whether Mann made it will be known when Mitsubishi releases earnings on May 9.

“We were quite successful,” Mann said. “The direction was not to make a loss. If you look at Mitsubishi, we’ve never made a loss for more than 10 years. I thought it would be a damn shame if we made a loss. I haven’t left many stones unturned in managing cost appropriately.”

The plan to begin sharing costs with Nissan was pulled ahead of schedule. The two automakers had envisioned their cost sharing starting during the new fiscal year, running from April 1, 2017, to March 31, 2018, with projected synergies of up to $226.4 million. But Mann pulled forward $27.2 million to the year just ended.

Savings came from a spectrum of actions, such as sharing the cost of transporting Nissan and Mitsubishi vehicles from plants in Southeast Asia, using shared aftermarket parts warehousing, and from joint sales financing in some markets. Mitsubishi also renegotiated the procurement of some parts by offering a larger scale that included Nissan, Mann said.

Management challenges

Mann says his reboot will also hinge on five challenges on the soft side:

1. Motivating Mitsubishi workers to hang tough and work hard.

2. Giving the company direction and a goal to achieve.

3. Keeping the company focused on taking baby steps of progress.

4. Aligning all parts of the company to communicate better.

5. Instilling good discipline to keep the plan humming.

“We’ve got to motivate each other,” he said. “Without motivation, we don’t have anything.”

In many ways, Mann was groomed for the Mitsubishi assignment.

As Nissan’s chief performance officer until this post, Mann’s task has been to lead Ghosn’s global drive to improve Nissan’s profit margin and plant productivity.

Mann helped Nissan get within striking range of Ghosn’s goals before being dispatched to Mitsubishi, where he reports to longtime CEO Osamu Masuko who has stayed on.

“Sometimes, when you’ve got your head down, you understand the direction but don’t necessarily believe you can achieve the end point,” Mann said. “So what I’m trying to do is put an element of focus in there, in terms of one quarter at a time.”

Mann’s playbook
• Immediately cut operating costs.

• Speed cost-sharing plans with Nissan.

• Increase the U.S. dealer network.

• Consider sourcing vehicles from Nissan.

• Consider building vehicles in North America again.

Dubai becomes first city to get its own Microsoft font

Not content with having the world’s tallest building and biggest shopping centre, Dubai has become the first city to get its own font.

The typeface, designed with Microsoft, comes in both Latin and Arabic script, and will be available in 23 languages.

Government bodies have been told to use it in official correspondence.

But given the human rights record of Dubai and the United Arab Emirates, eyebrows will be raised at claims it is a font of “self-expression”.

Dubai’s Crown Prince Hamdan bin Mohammed al-Maktoum said he had been personally involved in “all the stages” of the development of the font.

It was “a very important step for us as part of our continuous efforts to be ranked first in the digital world,” he added.

“We are confident that this new font and its unique specifications will prove popular among other fonts used online and in smart technologies across the world”.

Dubai’s government said the typeface’s design “reflects modernity and is inspired by the city” and “was designed to create harmony between Latin and Arabic”.

“Self-expression is an art form,” says the .

“Through it you share who you are, what you think and how you feel to the world. To do so you need a medium capable of capturing the nuances of everything you have to say.

“The Dubai Font does exactly that. It is a new global medium for self-expression.”

But the United Arab Emirates – of which Dubai is part – has been criticised for its restrictions on free speech.

The constitution does guarantee the right to freedom of opinion and expression, but Human Rights Watch (HRW) says this “has no effect on the daily life of the citizen” and the country “has seen a wave of arrests and violations of human rights and freedoms and mute the voices of dissent”.

In March, high-profile human rights activist , a move HRW said showed “complete intolerance of peaceful dissent”.

The UAE’s official news agency, WAM, said Mr Mansoor had been held “on suspicion of using social media sites to publish “flawed information” and “false news” to “incite sectarian strife and hatred” and “harm the reputation of the state.”

Social media giants ‘shamefully far’ from tackling illegal content

A smartphone

Social media firms are “shamefully far” from tackling illegal and dangerous content, says a parliamentary report.

Hate speech, terror recruitment videos and sexual images of children all took too long to be removed, said the .

It called for a review of UK laws and stronger enforcement around illegal material.

And the government should consider making the sites pay to help police what people post, it said.

The cross-party committee took evidence from Facebook, Twitter and Google, the parent company of YouTube, for its report.

It said they had made efforts to tackle abuse and extremism on their platforms, but “nowhere near enough is being done”.

The committee said it had found “repeated examples of social media companies failing to remove illegal content when asked to do so”, including terrorist recruitment material, promotion of sexual abuse of children and incitement to racial hatred.

It said the largest firms were “big enough, rich enough and clever enough” to sort the problem out, and that it was “shameful” that they had failed to use the same ingenuity to protect public safety as they had to protect their own income.

The MPs said it was “unacceptable” that social media companies relied on users to report content, saying they were “outsourcing” the role “at zero expense”.

Yet the companies expected the police – funded by the taxpayer – to bear the costs of keeping them clean of extremism.

The report’s recommendations include:

  • The government should consult on requiring social media firms to contribute to the cost of the police’s counter-terrorism internet referral unit
  • It should also consult on “meaningful fines” for companies which failed to remove illegal content within a strict timeframe, highlighting proposals in Germany which could see firms fined up to £44m and individual executives £5m
  • Social media companies review urgently their community standards and how they are being interpreted and implemented

“Social media companies’ failure to deal with illegal and dangerous material online is a disgrace,” said committee chairwoman Yvette Cooper.

“They have been asked repeatedly to come up with better systems to remove illegal material such as terrorist recruitment or online child abuse.

“Yet repeatedly, they have failed to do so. It is shameful.”

Ms Cooper said the committee’s inquiry into hate crime more broadly was curtailed when the general election was called and their recommendations had to be limited to dealing with social media companies and online hate.

Home Secretary Amber Rudd said she expected to see social media companies take “early and effective action” and promised to study the committee’s recommendations.

Facebook, Twitter and Google did not respond to a BBC request for comment on the committee’s findings.

The firms had previously told the committee that they worked hard to make sure freedom of expression was protected within the law.

Last week, the NSPCC called for fines for social networks which failed to protect children.

NSPCC chief executive Peter Wanless said social media sites should face penalties if children saw inappropriate material.

He also said the government should consider age-rating sites in the same way as the British Board of Film Classification rates films.

Internet companies’ voluntary regulations on child protection were “not up to scratch” , he said.

“Online safety is one of the biggest risks facing children and young people today and one which the government of the day needs to tackle head on,” he added.