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CHAMCO Puts Mexican Plant on Hold, Still Plans Detroit Appearance

Lack of a rail line near the proposed Tijuana site pushes back assembly plant plans, says the U.S.-based company overseeing the launch of Chinese cars in North America.

Plans by Chinese auto maker Hebei Zhongxing Automobile Co. Ltd. and its U.S. partner to build a $300 million vehicle assembly plant in Tijuana, Mexico, have been halted, an official tells Ward’s.

Hebei Zhongxing, also known as ZX Auto, revealed in June it would build the plant, targeted to produce up to 150,000 light trucks annually beginning in 2009. The vehicles were to be sold in Mexico, South America and possibly the U.S.

However, a top official with ZX Auto North America Inc.’s New Jersey-based parent, Chinese America Cooperative Automotive Inc. (CHAMCO), now says it is heading back to the drawing board to look at other potential plant sites in Mexico.

“We committed in June to build an assembly facility in Mexico, we made that commitment in writing,” CHAMCO Chairman Bill Pollack tells Ward’s. “And we had a piece of land picked out. (But) we found at the last minute that land would not get rail sighting until several years (beyond) what we expected.”

Pollack says once a new site is selected, it will be three years before output commences.

CHAMCO still plans to import a ZX Auto-built SUV and compact pickup truck into Mexico, but at a later date than previously announced.

The combination of the plant delay and an edict to re-do certification testing has pushed back the sales launch of the two models from early fall to January.

Pollack says the new date is “somewhat fluid,” as it hinges upon having a new land deal signed as well as receiving Norma Oficial Mexicana certification, mandatory in order to sell products in Mexico.

“We went for the testing in California in a lab that was certified by Mexico,” Pollack says. “At the time, we were led to believe that would be sufficient for Mexico. But now we’re being told we have to do everything in Mexico.”

Furthermore, in order to get a partial tax waiver on its initial imports into Mexico, a land deal must be inked, Pollack says.

While Mexican plans are delayed, the mid-2008 U.S. sales launch for CHAMCO’s SUV and truck remains on track, Pollack says.

“We’re very confident we will be first,” he says, promising CHAMCO’s planned July rollout will beat all other Chinese auto makers to the market.

CHAMCO is among a bevy of Chinese vehicle manufacturers slated to appear at the Detroit auto show in January. Included in the list of exhibitors is Changfeng Group Co. Ltd. and Geely Automobile Holdings Ltd.. Changfeng was at the 2007 show, and Geely made a Detroit appearance in 2006.

Last year, CHAMCO displayed its U.S.-bound SUV and truck at a site outside Cobo Center, the official location of the Detroit show.

Because CHAMCO primarily is concerned right now with signing U.S. dealers than drawing in U.S. consumers, Pollack says he’s uncertain if the exhibit will remain at Cobo for the show’s entire 9-day public run.

“I’d rather not talk to consumers until the spring when we’re much closer to bringing cars here,” he says, adding CHAMCO also will attend next year’s National Automobile Dealers Assn. convention in San Francisco and the 2008 New York auto show.

CHAMCO has more than 40 dealers signed right now, and another 30 or 40 are going through the due-diligence process, Pollack says.

CHAMCO’s full network will consist of 150 dealers. But the auto maker will go ahead with its U.S. launch next year even if it initially falls short of that number, he says.

“I’m more concerned about the date of homologation than hitting 150 dealers,” Pollack says, adding the process has been slow because dealers are being asked to take a risk by investing in CHAMCO.

Race-car driver Steve Saleen was hired in June as CEO of ZX Auto North America in order to help with dealer development and the homologation process. The vehicles sold in China are certified Euro 3 and not Euro 4, which is equivalent to the current U.S. emissions standard.

While recalls of Chinese-made goods have been making headlines this summer, Pollack believes the heavy regulation of the auto industry, both in China and the U.S., and the quality checks CHAMCO has in place at ZX Auto’s Chinese plants will prevent any embarrassments when the vehicles arrive next year.

“We chose this specific partner because we really liked their quality operation,” Pollack says of ZX Auto, which is a minor Chinese player, having sold 34,000 units globally last year. Although that’s far below competitors that sell in the hundreds of thousands, such as Chery Automobile Co. Ltd., ZX Auto is the leading producer of light trucks in China.

“The plant is terrific,” Pollack says. “They test-drive every single car they produce. (And) finally, part of our contract with this partner is we have our own quality inspectors in every factory. I have in each plant 10 people who work for me, not my Chinese partner.”

Pollack says the inspectors eye 187 critical points during the assembly process, and each must affix their personal gold seal to every vehicle.

“Without 10 gold seals on the door panel, the car does not get put on a ship to the U.S.,” he says.

Pollack dubs “heart stopping” the video posted on the Internet that showed the disastrous results of a Russian crash-test of a Chinese-built Chery model. But he says preliminary testing of ZX Auto models has shown they “are too strong (to fall victim to the same fate).

“In fact, we’re in the process of adding front and rear absorption and crumple zones to pass U.S. regulations,” he says. “These are heavy, strong, fullsize vehicles.”

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