Automotive News - February 11, 2008 - (Page 48) 48 • FEBRUARY 11, 2008 S TA R T U P TA R G E T S N O R T H A M E R I C A CHAMCO Pollack: Low prices will attract buyers continued from Page 46 Plans unravel to build trucks in Mexico Diana T. Kurylko dkurylko@crain.com That will be Zhongxing’s first experience in such a competitive market. It currently exports vehicles to Russia, Romania and Australia. Zhongxing is building an assembly plant in Changchun, China, to produce vehicles for export to North America. That plant is supposed to be finished this summer. But even if Zhongxing meets that schedule, it is unclear whether the vehicles will be export-worthy. The squarish SUV lacks the aerodynamics of today’s vehicles. In markets in which the vehicles are sold, magazine articles suggest that the Landmark SUV and Grand Tiger pickup have the styling, ride and handling of 1980s-era Toyotas. Tim Dunne, director of J.D. Power and Associates’ AsiaPacific Market Intelligence, says he has seen both vehicles Chamco pro- PARSIPPANY, N.J. — Chamco wants to start selling Chinese-made light trucks in Mexico late this year, but a plan to build those vehicles there has unraveled. At a press conference in Mexico last summer, company Chairman Bill Pollack announced that Chamco and its Chinese automaker partner, Hebei Zhongxing Automobile Co., would build an assembly plant together near Tijuana. The plant had a $300 million price tag; Chamco and Zhongzing would split the cost. Chamco wanted to assemble an SUV and pickup there by 2009, and Pollack says he had held preliminary talks with suppliers. The partners chose a site for the plant in a barren, hilly area 18 miles south of Tijuana that the Mexican government was developing. The plant was to assemble vehicles from knockdown kits imported from China. While several Chamco executives have manufacturing experience, Pollack says, the company was to hire an outside firm to run the factory. By investing in Mexico, Chamco hoped to avoid Mexico’s vehicle import tax of nearly 50 percent. Chamco could bring in up to 50,000 vehicles free of duty, and they would require little work to adapt them to Mexican standards, says Pollack. Most important, Mexico would have been a testing ground for the United States. But the deal unraveled. Pollack says there were “very specific agreements, handshakes and in some cases signed documents,” but the promised rail link did not materialize. “The schedule for building the railroad changed and it would be completed too late for us,” Pollack said. “We learned the hard way.” Pollack says he was naive, but adds that negotiations are under way for another Mexican site. Pollack says he won’t disclose further details until he has a signed deal. Chamco also is considering construction of a semi-knockdown kit assembly plant in the United States. The company has talked to the Puerto Rican government about incentives, says Pollack. “Puerto Rico has not signed a deal yet, but the Puerto Rican government is being very aggressive,” he says. Pollack envisions kit assembly in Mexico, Canada and the United States. He says Chamco is in discussions with officials in New Jersey, California and Texas. “They are offering a variety of sites,” he says. Pollack didn’t predict when assembly might begin. If built, one of those kit-car plants would be converted into a full-scale assembly plant in four or five years, Pollack says. n “ The overall interior refinement, exterior fit and finish and ride and handling are not up to the higher standard that we’re accustomed to in the U.S. TIM DUNNE J.D. Power and Associates ” poses to import. His opinion: They are a generation behind light trucks currently sold in the United States. “The overall interior refinement, exterior fit and finish, and ride and handling are not up to the higher standard that we’re accustomed to in the U.S.,” Dunne says. Chamco displayed the vehicles at the 2007 National Automobile Dealers Association convention in Las Vegas. Since then, the company has modified the vehicles, Pollack says. The redesigned vehicles have new grilles, a new powertrain from an undisclosed Chinese supplier, twostage airbags, standard leather seats and five-year powertrain warranties. The vehicles will have a base price of $14,000, not including shipping. Bill Pollack says he has formed a solid executive team at Chamco that includes corporate officers Mario Ferla, above, a former president of Case IH; and Thomas Del Franco, a former COO of Audi of America. Red tape Pollack says his vehicles’ low price will attract U.S. customers when sales start in 2009. But first Pollack must adapt the truck to U.S. roads and regulatory standards. Pollack postponed plans to launch the vehicles this year so he would have more time to meet federal emissions and safety standards. The red tape forced Chamco to drop plans to show production models at the New York auto show. “We planned to be through with all the testing, but we are a month or two behind,” Pollack says. Saleen, who owns a share of Chamco, recruited several executives from his old company to homologate the vehicles at a new Chamco research and engineering facility in Anaheim, ALFREDO MILLAN Bill Pollack, left, says Steve Saleen recruited several executives from Saleen’s old company to adapt vehicles at a new Chamco facility in Anaheim, Calif. Optimists Chamco projects these U.S. sales: 105,000 units in the first year of sales, from early 2009 to early 2010 205,000 units in 2010 with a pickup and SUV 360,000 units in 2011, adding a crossover and passenger car 475,000 units in 2012 Source: Chamco Calif., Pollack says. A spokeswoman for the EPA says Chamco has talked to the agency about meeting U.S. regulations, but she declined to disclose details. Meanwhile, the National Highway Traffic Safety Administration con- firmed Chamco and Hebei Zhongxing received permission to import noncompliant vehicles and a prototype for testing. Neither agency would say how long it takes to meet U.S. standards. However, Chrysler LLC says it will need 18 months to two years just to crash-test cars that Chinese maker Chery Automobile Co. will produce for Chrysler for sale in the United States. Jim Hall, owner of the automotive consulting firm 2953 Analytics in suburban Detroit, doubts that Chamco will be able to certify its vehicles that quickly — despite Saleen’s experience. “It is an incredibly daunting engineering problem,” Hall says. If Chamco uses a Chinese engine rather than the Mitsubishi powerplant used in the Landmark and Grand Tiger, Hall predicts that will delay regulatory approval. “If you do not allow three years for homologation of an engine, you’ll find your cars aren’t salable (in the United States),” he says. Pollack won’t identify the maker of the new engine, but he says it “has proven itself and has engines in a number of vehicles on the market.” And he says Chamco has run more than 1,000 tests, including crash tests. But such a venture carries serious risk for dealers who want to invest $300,000 in Chamco, says one veteran dealership consultant. Sheldon Sandler, a managing partner of Bel Air Partners in Skillman, N.J., says successful brands don’t ask their dealers to invest money in the company. “I would be very cautious before I made an investment in what sounds like a startup venture,” says Sandler. “We are dealing with a very complex proposition. It will take hundreds of millions of dollars.” c
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