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Free Market Project

3/1/2006 11:46:42 AM

Updated 02/24/06

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Lou Dobbs Plays Paul Revere over Chinese Cars
CNN’s always-alarmist anchor warns of another Yugo coming by sea.

By Ken Shepherd
Free Market Project
Jan. 12, 2006

Send this page to a friend! (click here)     “The Red Chinese are coming, the Red Chinese are coming,” seems to be the cry from Lou Dobbs about the advent of a new Chinese car company, Geely, which is slated to grace American showrooms beginning in 2007. But this is just the latest instance of Dobbs’ baseless scaremongering about the U.S. economy.

The CNN anchor anticipates success for Geely’s business in the United States, even though it is outsold in China by General Motors Corp. And its cars are being imported to the States by the same businessman who brought in the failed Yugo in the 1980s and whose Japanese auto partnership, Subaru, captures less than 2 percent of the U.S. market.

Worried about Geely, the “Red Star Rising” featured in Bill Tucker’s January 10 report on “Lou Dobbs Tonight,” the business anchor complained about the $3.50-an-hour it costs to employ a Geely factory worker. “Well, there's no problem,” Dobbs said sarcastically, “It's all about competition, right? Forget the living wage and a living standard.”

Unfortunately for Dobbs’ career as a prophet of doom, Geely is considered a substandard brand to General Motors (NYSE: GM) products, which outpace Geely in sales within China itself.

Vehicles manufactured by competitor Shanghai Automotive, a Chinese manufacturing subsidiary of General Motors, have done better in China than home-grown Geely. Reuters reported on January 9 that “GM, which operates in a partnership with Shanghai Auto, sold 665,000 cars in China in 2005 and has taken the top spot there in terms of market share with its Buick brand.”

One reason Chinese car buyers may prefer GM brands to Geely is that the Chinese company’s designs may well be a cheap, illegal knockoff of American engineering. Bill Vlasic of the Detroit News reported a year ago in the Jan. 2, 2005, paper that Geely’s “top-selling vehicle in China, the QQ, is the subject of a bitter legal battle with GM, which charges that the small sedan is a direct copy of GM's Chevrolet Spark.”

Vlasic added that the company was “still considered a second-tier Chinese auto manufacturer behind Shanghai Automotive Industry Corp.'s joint ventures with industry giants GM and Volkswagen AG.”

In the United States, Geely might end up being more of a cellar dweller than second-tier among American car buyers. The “Red Car,” as Geely was labeled onscreen during Tucker’s report, is coming to the U.S. courtesy of the man who gave us the Yugo.

Geely automobiles will be imported to the U.S. in 2007 under an arrangement with Visionary Vehicles, a company run by Malcolm Macklin, the automotive genius behind Subaru and Yugo. As Bill Koenig of Reuters reported on January 4, the Yugoslavian-manufactured car lasted a mere five years in the U.S. with peak sales at 50,000, while Subaru, according to a recent press release, sold a “total of 196,002 units in 2005,” or roughly 1.2 percent of the 17 million new car sales economists predict for 2006.


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