Booth Newspapers

SOUTHFIELD, Mich. – Chinese automaker Geely Automobile Co. says it plans to start selling what would be by far the cheapest new car in the U.S. market – an $8,500 sedan – by the fall of 2008 and might locate its U.S. headquarters in Michigan. Geely could be the first Chinese automaker to import cars for sale in the United States, a move that is likely to send shivers up the spines of ailing domestic automakers and further outrage labor leaders and politicians who say China thumbs its nose at international trade rules.

“We don’t care who’s first,” Geely USA Chief Operating Officer John Harmer said Wednesday at a Society of Automotive Analysts meeting.

“What we care about is that we will be acknowledged as worthy of competing in the U.S. market.”

Malcolm Bricklin, an independent distributor who introduced Americans to Yugos and Subarus, has said he wants to import vehicles built by China’s Chery Automobile Co. to the United States by the end 2007. But analysts are skeptical about his plans. Just two months ago, Geely (pronounced Jee-lee) became the first Chinese company to display a vehicle at the North American International Auto Show in Detroit.

Harmer said he’s looking for a site for a small U.S. headquarters operation, probably within a year. Harmer currently works out of an office near his home in suburban Salt Lake City.

“The Detroit chamber of commerce has been very aggressive and very persuasive – very persuasive” in trying to land the Geely headquarters, Harmer said. “In China, Detroit is the automobile capital of the world.”

Harmer said he has not spoken with state economic development officials about Detroit or other possible headquarters sites in Michigan.

“We would welcome the opportunity to talk to the folks at Geely and we would welcome the opportunity to help them locate here,” said Michael Shore, a spokesman at the Michigan Economic Development Corp.

Geely will initially employ fewer than a dozen people at its headquarters, mostly sales and marketing staffers.

But that number would likely grow to about 50 by the end of the first year, Harmer said.

The Geely sedan, about the size of a Honda Civic, would include power windows, air conditioning and a CD player.

“It will be a basic, functional automobile,” said the 71-year-old Harmer, who briefly served as California’s lieutenant governor under then-Gov. Ronald Reagan.

Geely will sell the car to dealers at a wholesale price of $7,500, he said. About 200 dealers who now sell other brands have expressed interest in selling Geelys, Harmer added.

Chevrolet’s Aveo, selling for about $12,399, is currently the lowest price car in the U.S. market, said Tom Libby, senior director of industry analysis at the Power Information Network, a subsidiary of J.D. Power and Associates in Troy, Mich. Libby said Power is forecasting that Geely won’t start selling cars here until mid-2009. That’s because the company still has a lot of work to do, including meeting U.S. safety and emissions standards.

“There are frequently hiccups and delays with launches like this,” he said.

Harmer acknowledged that trade tensions between the United States and China, and a perception of the poor quality of Chinese vehicles could be stumbling blocks in Geely’s start-up efforts. The U.S. Senate is threatening to enact across-the-board tariffs on Chinese-made goods here if China does not revalue its currency, which keeps prices of its exports artificially low, by the end of the month. And Harmer said Geely still must win permission from the Chinese government to export vehicles to the United States.

“The Chinese are not going to be embarrassed by any vehicle they send to the United States,” he said.

The prospect of competing here with the Chinese no doubt worries Detroit’s automakers, said David Cole, chairman of the Center for Automotive Research in Ann Arbor. But Cole said the Chinese face costs for such things as vehicle development, supplier networks and transportation that are higher than they were when the Japanese and Koreans first started selling cars here years ago. And the Big Three might just bring their own Chinese-built vehicles here, he said.

“I think competition from the Chinese will make things uncomfortable, but not fatal,” Cole said.