Not-so-secret weapon: GM's Chinese engines

[Vodkeith]

Not-so-secret weapon: GM's Chinese engines

By Ian Austen

 

Tuesday, March 25, 2008

OSHAWA, Ontario: General Motors car engines were once the stuff of American legend. The Beach Boys sang, "nothing can touch my 409," about a powerful Chevy V-8. Oldsmobile owners in 1981 were so angered that their cars had been fitted with Chevrolet engines instead of Oldsmobile "Rockets," subject of another hit song, that they successfully sued GM over the swap.

 

GM has eliminated brand distinctions between its engines, saddling them with names unlikely to inspire songwriters, like Ecotec, Vortec and Northstar. But some owners of the Chevrolet Equinox, a "compact" sport utility vehicle built in North America, might be surprised to learn the origin of the engine under their hoods - it is made in China.

 

Soon, China will move from exporting mostly low-end auto parts to the U.S. market, like wheels, to sending whole vehicles. Last year, Chrysler signed a deal with Chery Automobile, the largest Chinese car company, to supply a Dodge subcompact.

 

But one of the most important steps on China's long march to an auto export industry was the little-noticed arrival of the humble engine inside the 2005 Chevy Equinox.

 

"This is the first Chinese-made engine going into this market," said Eric Fedewa, an analyst at CSM Worldwide, an automotive research firm. "It was an experiment to see if GM could use its facility in China to take costs out of a vehicle."

 

Engines, along with transmissions and interior components, are the most expensive parts of a vehicle, accounting for a quarter to a third of its manufacturing costs.

 

GM has neither broadcast nor hidden the fact that the Equinox engine (and that of its twin, the Pontiac Torrent) is made in China. The car's sticker notes that 55 percent of its parts are from the United States and Canada, 20 percent from Japan, 15 percent from China, and the rest from elsewhere. But no sticker tells consumers the engine is built at Shanghai General Motors, a joint venture between GM and Shanghai Automotive Industry, a Chinese company.

 

Originally intended to power Buick sedans built for the Chinese market, the engine is the only one available in the Equinox base model. Starting this model year, a larger American-made motor became an option in a higher-end version of the SUV. The same model of engine as the one made in China is produced at a GM engine plant in Tonawanda, New York, about a two hour drive from the Canadian factory that builds the Equinox.

 

GM does not break out internal costs, so it is not known how the Chinese engines compare in price to those from Tonawanda. Fedewa said an engine of this sort typically cost about $800 to $900 to make.

 

Even in an era of global manufacturing, the Equinox is exceptionally international. Its engineering was largely done here in Oshawa, headquarters of General Motors of Canada. It uses a five-speed automatic transmission made in Japan by Aisin Seiki, though GM is a leading manufacturer of automatic transmissions. And the parts are assembled at a factory in Ingersoll, Ontario, a joint venture between GM and Suzuki, another Japanese company.

 

Suzuki was a main driver in the decision to use the Chinese-made engine. Dick Kauling, a senior engineering manager at GM Canada who helped develop the Equinox, said his group worked closely with engineers at Suzuki, as well as GM engineers in Germany, China and Warren, Michigan.

 

"The Suzuki guys said, 'We have the global logistics that can make this happen,' " Fedewa said. Suzuki proposed loading a container ship in Shanghai with engines, then having it stop in Japan to pick up transmissions on its way to Canada, he said.

 

A 25-year GM veteran, Kauling remembers when car buyers hotly debated the differences between the engines in different GM brands, not to mention those from other automakers. But he said the old way of organizing production was less than efficient. Early in his career, the company was running short of engines for Chevrolets but had a surplus of Oldsmobile motors. He was assigned to find a way to modify the incompatible Oldsmobile engine - the two brands had not even been able to agree on common bolt sizes - to fit into a Chevy body.

 

The Equinox experience was different, he said.

 

"I don't think we're concerned where the parts come from," Kauling said. The Chinese engine "has got General Motors all over it."

 

But the idea of using Chinese-made engines did not sit well with the Canadian Auto Workers, the union that represents workers at the Equinox factory. Because of its complexity, engine assembly employs a higher proportion of skilled, well-paid workers.

 

Moreover, Basil Hargrove, the union president, blames much of the North American industry's problems on what he calls unfair trading practices by Asian manufacturers.

 

"Today it's South Korean and Japan and tomorrow it's going to be China," he said. "It's only a matter of time before GM, Ford and Chrysler are going to deal with the crisis they face by going into these countries and shipping into here. Very few consumers ask: Where is the engine built or where is the transmission made?"

 

Assessing the quality of Chinese manufacturing is difficult, partly because of the design of this particular engine.

 

For instance, Gabriel Shenhar, the senior engineer of Consumer Reports auto test division, said that in the Equinox, the engine was coarse, noisy, used more fuel than similar vehicles and produced relatively little horsepower for its size.

 

But he did not blame those shortcomings on the Chinese. "This engine's blueprint did not originate in China," Shenhar said. "The 3.4 liter, 185 horsepower has always been a lackluster engine."

 

He said, "This is not the fault of Canadians that put the car together in Ontario but a reflection of GM's lack of attention to detail and halfhearted effort on this car."

 

The magazine gives the Equinox a "worse than average" reliability rating, although Shenhar said its problems were not isolated to any particular part of the vehicle.

 

Still, Fedewa, the analyst from CSM Worldwide, anticipates that the next Equinox models, expected in about two years, will not be fitted with Chinese engines.

 

He said the past three years had shown that engines and transmissions did not travel well. "You're talking about assemblies that are big, bulky and heavy so it's hard to pack a lot of them into a container ship," Fedewa said.

 

To keep costs down, GM maintains a relatively low inventory of the Chinese engines in Canada. That means that any disruption in the long supply chain from Shanghai could swiftly shut down the Canadian assembly plant.

 

"The biggest fear of a vehicle manufacturer is that they can't build vehicles because of a parts shortage," Fedewa said. "Sourcing from half way around the world is very challenging."