Wednesday, March 31, 2010

RANT: China's tech theft, now done with $$$!

BEIJING - APRIL 20:  A model poses beside the ...Image by Getty Images via Daylife
Everybody knows Kia and Hyundai, but anybody knows Ssangyang? They are actually the fourth largest automaker in Korea. And they were just MUGGED by the Chinese, done with money, rather than espionage.

Ssangyong Motors, a minor Korean car maker (4th in Korea), was in financial trouble in 2005, and when Shanghai Motors (yes, from China), also known as SAIC, offered a financial deal, that they will establish a co-op venture in China, and take 51% stake of Ssangyong. The Koreans were very skeptical. It is clear that China wants the tech (SsangYang has hybrid tech, among other stuff that Shanghai motor doesn't), not the employees.

The deal was rammed through, with some promises that no one will be laid off. However, after the deal went through, and the plant was indeed established in China, but this also lead SAIC gaining access to ALL technology and researched made by Ssangyong Motors, including the hybrid tech. With no executive board input, the two company networks are linked, and as a result, virtually everything in the Ssangyang network was copied.

Clearly, just having the plans is not enough, so many Korean experts were called to China for "consultation" regarding parts or parts compatibility problems, and eventually SAIC got all the tech. During the time, virtually no R&D was done. Just minor sheetmetal refresh. This resulted in sales drop, severe enough to be of concern to all, even the employees. After all, the joint venture was supposed to provide some cash so the company can do some new products.

After 3+ years, and squeezing all the tech out of SsangYang, during which time many employees were forced out with early retirement or trumped up disciplinary actions, SAIC decided they no longer needed Ssangyong, so they simply sold off most of their shares, (41%, down to 10%), left the company to its fate. The lack of fresh models, plus the global economic crisis, lead the company to a severe loss.

With the pullout of SAIC, the company went into receivership in early 2009, and when the trustee ordered 30% layoff, a major strike in September 2009 crippled the plant. Dozens were jailed and hundreds were arrested in one of the more violent labor protests in recent Korean history.

The Korean prosecutor's office investigated at the urgings of many minority stakeholders of Ssangyong motors, and concluded that SAIC conducted tech theft, transferring technology from Ssangyong to SAIC without the board's approval. However, the results was not released until 2010, even though the investigation concluded in 2009.

SAIC currently has deals with GM (making Buicks), Ford (making Volvos), and VW (making Jettas) in China.

It appears at least GM is getting something out of the deal, as some of the new Buicks are designed in China. But just how much tech is GM giving up in the process? And Ford? And VW? (And now, Volvo?)

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