Buy American, get Chinese engine (NY Times)

In global supply era, old way of thinking on parts has become quaint.

By Ian Austen

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," the subject of another hit song, that they successfully sued GM over the swap.

The company has since eliminated brand distinctions between 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's made in China.

Last year, China exported more than $12 billion in auto parts, up from less than $2 billion in 2002 -- the majority to North America. The increase in exports has added to the problems plaguing North American suppliers. Most famously, Delphi, which is seeking to emerge from bankruptcy, has closed dozens of plants and moved some production overseas to become more competitive, including to China.

Soon China will be exporting whole vehicles to North America. Last year, Chrysler signed a deal with China's largest car company, Chery Automobile, to supply a Dodge subcompact.

One of the most important steps on China's long march to becoming an auto exporter 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 A. Fedewa, vice president for powertrain forecasts at CSM Worldwide, an automotive analysis firm. "It was an experiment to see if GM could use its facility in China to take costs out of a vehicle."

GM neither promoted nor hid the fact that the Equinox engine (and that of its twin, the Pontiac Torrent) is made in China. The car's sticker notes 55 percent of its content is make in the United States and Canada, 20 percent in Japan, 15 percent in China and the rest from elsewhere.

But no sticker tells consumers the engine is built at Shanghai General Motors, a joint venture of GM and the Shanghai Automotive Industry Corp., 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 with the 2008 model, 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, N.Y., 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 with those from Tonawanda. Fedewa said an engine of this sort costs $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 firm.

Suzuki was a major 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 had worked closely with engineers at Suzuki, as well as GM engineers in Germany, China and Warren.

"The Suzuki guys said, 'We have the global logistics that can make this " Fedewa said. happen,'

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.

A 25-year GM veteran, Kauling remembers when car buyers hotly debated the differences between the engines in 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.

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