SHANGHAI -- Friction between Shanghai Automotive Industry Corp., a major state-owned Chinese automaker, and its Korean subsidiary SsangYong Motor has reached a climax.
In early January, SsangYong filed for bankruptcy protection in Korea. The move sent SsangYong workers demonstrating before the Chinese embassy in Seoul last week condemning alleged irresponsible behavior of SAIC.
While SsangYong is a mess, Chinese automakers shouldn't be discouraged about foreign acquisitions. SAIC's missteps in Korea hold valuable lessons.
Lesson one: Because Chinese automakers lack overseas experience, they should start small and proceed cautiously.
SAIC underestimated the challenges when it bought a 49 percent interest in SsangYong for nearly $500 million in 2004.
Lacking a grasp of Korean politics and with no experience dealing with labor unions, SAIC failed to win the trust of Korean workers. Shortly after SAIC took over, SsangYong's workers staged a strike. After that, a tug of war between SAIC and the labor union of the Korean SUV maker has never ended.
Moreover, SAIC has made little progress integrating SsangYong into its operations, including a plan to assemble SsangYong's SUVs in China.