Thursday is Veterans day. It is a day when Americans reflect on the scarifies of our grandfathers, fathers, uncles, brothers and friends who fought against the Nazis, Japanese, Communists and now the Taliban.
It has been 60 years since brave American men fought against the Red Chinese on the Korean peninsula. Battles such as Pork Chop Hill and Heartbreak Ridge are rarely discussed in the history books our children are taught from each and every day in our publicly funded schools, which is why there will be no outrage from the masses about this story.
In a nutshell the U.S. government, as majority owner of GM, sold Nexteer, a unit of GM which made steering equipment for decades under the name Saginaw Steering Gear, to the Chinese government for $450M. While its certainly upsetting that Americans in America are now working for a Communist government thats not the worst part of the story. Because you see the real kick in the teeth is that Nexteer produced the M1 carbine, which was one of the standard issue rifles for American solders in both WWII and the Korean War. Over 36,000 American lives were lost during the Korean War fighting the same Chinese government who now owns Nexteer thanks to our very own government.
On Thursday take a moment to reflect on the scarifies of our solders because our own government certainly doesn't seem to care about them anymore.
A GM Unit in China's Hands
You don't need to understand exchange rates and trade wars to grasp the economic change that has come to Saginaw, Mich. Remarkably, the largest private employer there will soon be the city government of Beijing.
Tempo's Zhou Tianbao, Pacific Century Motors' Zhao Guangyi and GM's Scott Mackie in Detroit in July when GM's Nexteer was sold.
In the weeks ahead, a 104-year-old unit of General Motors will be sold to new owners from China. The unit made steering equipment for decades under the name Saginaw Steering Gear. Now known as Nexteer, it employs 8,300 people around the world. Its new Beijing owners call themselves Pacific Century Motors.
You and the rest of the world probably missed this $450 million deal. General Motors, still controlled by the U.S. government, gave it little attention this summer as it readied its own high-profile return to the stock market.
But it is one of the landmark deals of the era, the first time Chinese investors have bought a U.S. industrial operation of such scale and history: Twenty-two factories around the globe, six engineering centers, 14 customer-support centers. All of it will be run from Saginaw, where devotion to the company extended to a now-defunct hockey team. It called itself the Gears.
During World War II, Saginaw Steering Gear manufactured M1 carbines used by Marines in the Pacific.
"Did it really need to be sold to the Chinese?" asks Roger Kahn, a Michigan state senator from Saginaw. "I want to see businesses successful in the U.S. owned in the U.S. This doesn't meet the standard."
Ironically, at the G-20 conference in Seoul this week, U.S. leaders are trying to cajole China to buy more from the U.S., to help right a trade deficit that hit $28 billion in August alone. Such imbalances, they say, helped feed the credit craze that culminated in the 2008 financial crisis.
All of these things are conveniently abstract at G-20 meetings. In Saginaw, they are experiencing first hand the collision of two economies in motion, of Chinese ambition and American pride.
People inside and outside the company seem gingerly accepting of Pacific Century, a venture of the city of Beijing's investment arm and a closely held Beijing auto parts company called Tempo Group.
Nexteer was in bad straits in recent years. It has been starved for capital. Its customers—other car companies—preferred it to be independent and not a part of GM.
Once Nexteer hit the auction block, the Chinese investors proved surprisingly thorough, even though some of them didn't speak English, said a person familiar with the transaction. They funded their deal with all cash, using no debt. And the opportunity for Nexteer to penetrate the Chinese auto market, soon to be the world's largest, was a major selling point for GM, this person said.
The Chinese buyers beat out Korean and U.S. private-equity contenders. The two sides announced their deal at a small July news conference in Saginaw. U.S. and Chinese flags flanked the dais.
"I'm sure there are a lot of people who are not happy they're Chinese-owned," says Scott Somers, who runs Mid-States Bolt & Screw just down the road from Nexteer, which is a customer. "But at this point it seems to be a positive thing. Lots of businesses are involved with that complex and depend on it for their livelihood."
The feeling is more begrudging for the workers inside the company. One, who called the Chinese "commies," complained to a union official that the U.S. flag and a P.O.W.-M.I.A. memorial flag were taken down when Chinese officials visited recently. A company spokesman said he had no knowledge of any flags being taken down.
And while they like the stability of new owners, "everyone is concerned about long-term viability," said one United Auto Workers official who asked not to be named. The union recently took a pay cut ahead of the transaction. "We don't know whether the intention is to buy the book of business and move to China or stay here. We do not feel comfortable."
One can sympathize with the union's worries of a Trojan horse. Auto parts have remained a key U.S. export. And Nexteer's new owners are eager to buy the company because of its more than 1,000 patents, says Jack Chen, an investment banker at Los Angeles's Transworld Capital Group who helped arrange the deal. "This dramatically shortens the technology gap between China and the rest of the world," he said in an interview.
It is hard to know just how the technology will make its way back to China in the years ahead. Nor whether that will hurt or help the people who work in Michigan or those served by the Beijing city government.
Meantime, Saginaw must strike a most practical of arrangements. Chinese capital and access to its home markets is once again giving the city some optimism after unemployment spiked to 14% early this year. The company is adding 100 engineering jobs this year. It is expected to increase its United Way contribution after having to reduce its gifts in recent years.
More broadly, direct Chinese investment on U.S. shores may help improve the countries' fraught trade relationship, in the same way that a wave of Japanese auto plants did here in the 1980s and 1990s.
More investment may also give the U.S. leverage to encourage China to open up its borders to U.S. firms, which are frequently hamstrung by onerous investment rules.
The U.S. was built on foreign investment for centuries, reminds Dewey & LeBoeuf attorney Alan Wolff, a former U.S. trade negotiator. "And we should bolster any investment that encourages U.S. manufacturing, including from China. We'd rather build it here than there."
And so it begins. The Pacific Century.
First stop, Saginaw.