Today China is the second largest and fastest growing car market in the world. Although far from closing the gap with the United States, many car makers are betting that China will eventually become No. 1 globally. It has already taken the lead, seemingly from nowhere, in the number of mobile phone users and Internet users, for example.

For the first time many Chinese can proudly claim their own set of four wheels, an almost universal symbol of middle-class attainment. In just under two decades, the once omni-present Flying Pigeon bicycles have made way for the likes of the Honda Accord, Toyota Camry, Buick LaCrosse, BMW’s 5s and 7s, as well as local cars such Chery and Geely. Just about every foreign carmaker has a presence in this market, setting up joint ventures with local Chinese companies to stimulate and feed exploding demand from Chinese consumers. 

“Below Zero”

One foreign car company that can rightly claim to have cleared the path, set the tone and provided the template for the rest, is Volkswagen. Martin Posth helped build and lead joint venture company Shanghai Volkswagen Automotive Company from “below zero”.  Over three years, Posth helped turn a dusty factory, producing cars with hardly any buyers, into one of the most modern vehicle assembly lines of the Volkswagen group, churning out the hugely popular Santana sedan, the venture’s flagship model. His first person narrative, 1000 Days in Shanghai : The Story of Volkswagen - the First Chinese-German Car Factory, is crammed with invaluable experiences and lessons drawn from an interesting chapter in the development of China’s car industry. In the book, Posth groups similar issues together and distils the learnings from these experiences into “Quick Lessons” at the end of each chapter. 

Initially Posth did not want this job. As one of the more senior executives in charge of personnel matters with a seat on the board of Audi, a Volkswagen subsidiary, Posth had a fulfilling career and plenty to keep him occupied. He did not need to take up this tough job in an unfamiliar country where the only common language linking both sides was a shared desire to get the joint venture up and running.

But Posth soon became an early convert to believing in China’s potential, calling the country -- then with a per capita annual income of US$350, and vehicle population of eight cars to a thousand people -- a “sleeping giant.” Clearly, he saw himself and Volkswagen making history by playing pied piper and leading the way into China for other car makers.

Worlds Apart

China today is vastly different from the 1984 China that Posth operated in. Mao suits were still widely worn, foreigners were required to use the now defunct Foreign Exchange Currency notes and, more critically, command economy mindsets and practices were still deeply entrenched -- even though Deng Xiaoping had set in motion market reforms six years earlier.

Posth and his Chinese and German colleagues, especially technical expert Hans-Joachim Paul, rolled up their sleeves and got to work. “All of us understood we were the agents of change, the driving force behind the reforms,” he writes. They dodged meddling bureaucrats, worked the systems in both countries, and bridged cultural differences to build an ever-increasing number of vehicles. In the process, they created history.

More than twenty years on, it is just about impossible for any Shanghai resident not to see Santana sedans plying the streets. Taxi drivers and private owners alike still run the Sang Ta Na, as the iconic car was called in Mandarin. To be sure, Volkswagen no longer occupies the leading position among foreign car brands in China (General Motors now holds that honour), but the latest figures show that Volkswagen is catching up fast. In any case, Posth has no need to brag. The Santana, whose latest variants are still in full production, has earned a permanent parking spot in China.

But what of the management issues and problems facing this joint venture? There were many. “No matter where you touch, you lay your hands on a dozen problems,” Posth writes. Translators gave up and went on strike in frustration when the straight-talking Germans and nuance-laden Chinese diverged instead of coming to a common understanding. There were also serious differences in attitudes and practices. For example, the Germans were fastidious about cleanliness while Chinese workers were oblivious to stray metal parts and dust. Add to this the average pay disparity -- in the range of 200 to 1 between Germans and Chinese -- and it is a wonder that nobody got hurt.

As a seasoned human resources practitioner, Posth has quite a few interesting stories to share. For example, he once asked a Chinese department manager to arrange for a worker to rid the floor of some dust. To his utter surprise, instead of delegating this lowly manual chore to a worker, the manager picked up the broom and swept the floor himself.

The book also contains a tinge of romance and nostalgia when, for instance, Posth’s two daughters were hired as extras in the Steven Spielberg movie, Empire of the Sun, which was set and shot in Shanghai.

Expatriate Challenges  

For Posth, one of his biggest challenges was not so much managing workers from China but, rather, his own fellow Germans seconded over from Volkswagen. Recalls Paul, the technical director of the joint venture to whom Posth gives unreserved credit, “our biggest problem was not the Chinese, but frustrated Germans”.

It is not difficult to imagine why. Even as the Chinese professed eagerness to learn ‘scientific management’ from their German partners, more often than not societal and cultural DNA got in the way. Many of the German expatriates, like Posth himself, had taken up their assignments without a clear idea of what to expect. Although some were on their second or even third overseas postings, they struggled to accept the tiny Shanghai apartments after the villas and servants they had enjoyed in countries such as Nigeria. In addition to a typically difficult day on the factory floor, German managers had to face frustrated wives with impatient children in tow.  

Despite everything, Posth succeeded beyond expectations. His initial five-year posting was cut short to just over three years when the Volkswagen management board invited him to join their ranks. During this period, production rose from two vehicles per day to an annual capacity of 60,000 units. Today, Volkswagen churns out 1.08 million units a year in China. Posth did not turn his back on China, however, after his departure. In the 1990s, he led the Asia Pacific business of the entire Volkswagen Group and, in June 1997, was made an “Honorary Citizen of Shanghai”.