Presentation for the Seminar "Business Ethics in China" @ University of Zurich

1. Reaching Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
China 2010 than by Car –
Course: Business Ethics in China
University of Zürich
Page 1
But is it Safe?»
Business ehtical discussion on product safety issues of Chinese cars
and European-Chinese automotive cooperations
University of Zurich
Business Ethics in China
Spring Term 2010
Presentation of the Seminar Paper
Andreas Schwarzinger

2. «What it‘s all about.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
Table of contents.
University of Zürich
Page 2
» the automotive industry and China
» the automotive industry and China
» european-chinese automotive cooperations
» european-chinese automotive cooperations
» product safety in the automotive industry
» product safety in the automotive industry
» ethical discussion
» ethical discussion

3. «What it‘s all about.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 3
Table of contents.
» the automotive industry and china
» the automotive industry and china

4. Andreas Schwarzinger
Product Safety and European-Chinese
«Attack of the Dragon.»
Facts and figures on the Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 4
automotive industry.
» China has become the biggest automotive
1.
automotive industry
and China
» » »
2.
european-chinese
market in the world and overtook the USA
automotive cooperations
in 2010:
3.
product safety in the
automotive industry
» More than 10 million new car registrations
4.
ethical discussion
in 2009
» Expected new car registrations of 17 million
in 2010
» 13.7 million produced cars in 2009

5. Andreas Schwarzinger
Product Safety and European-Chinese
«Attack of the Dragon.»
Facts and figures on the Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 5
automotive industry.
» Car population:
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations » 500 cars per 1000 habitants in Germany
» 21 cars per 1000 habitants in China
3.
product safety in the
automotive industry
4.
ethical discussion » Still a huge growth potential!

6. «What it‘s all about.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 6
Table of contents.
» european-Chinese automotive cooperations
» european-Chinese automotive cooperations

7. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Shall we do this together?»
Course: Business Ethics in China
University of Zürich
Introduction into European-Chinese
Page 7
cooperation in China.
» 2 ways of operating in China for
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
foreign manufacturers:
» Paying high import taxes
3.
product safety in the
automotive industry
» Forming joint ventures with Chinese
4.
ethical discussion
firms

8. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Sorry, but that‘s a secret.»
Course: Business Ethics in China
University of Zürich
Knowledge transfer within European-
Page 8
Chinse joint ventures.
» Intention of (forced) joint ventures:
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
» Knowledge transfer from foreign to
3.
product safety in the
automotive industry
Chinese firms
4.
ethical discussion » Closing the technological gap between
foreign and Chinese manufacturers
» Make the Chinese automotive industry
more competitive

9. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Sorry, but that‘s a secret.»
Course: Business Ethics in China
University of Zürich
Knowledge transfer within European-
Page 9
Chinse joint ventures.
» But:
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations » Joint ventures are solely used to produce
3.
European cars for the Chinese markets
product safety in the
automotive industry
» Knowledge transfer takes mainly place in the
production and manufacturing of vehicles
4.
ethical discussion
» R&D and marketing activities are still
accomplished in the headquarters outside of
China

10. «What it‘s all about.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 10
Table of contents.
» product safety in the automotive industry
» product safety in the automotive industry

11. Andreas Schwarzinger
Product Safety and European-Chinese
«Ouch!»
Automotive safety issues of the
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 11
past.
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

12. Andreas Schwarzinger
Product Safety and European-Chinese
«Ouch!»
Automotive safety issues of the
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 12
past.
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

13. «Ouch!»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 13
Impact of automotive safety issues.
» Automotive safety issues had and still have a large
1.
automotive industry
and China
» » »
2.
impact in Western countries
european-chinese
automotive cooperations
» Tilting Mercedes A-Class (“Elk test”)
3.
product safety in the
automotive industry
» People died because the first-gen Audi TT broke out
4.
ethical discussion
» Gas pedal of some Toyotas stuck
» Dacia Logan (produced by Renault) scored poorly in
crash tests

14. «The big bang.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 14
Importance of crash tests.
» The European Union (European Commission) is
1.
automotive industry
and China
» » »
2.
in charge of approving new cars for the
European market
european-chinese
automotive cooperations
3.
product safety in the
automotive industry » Within the approval process, the authorities rely
4.
on the results of consumer crash tests like e.g.
the EuroNCAP
ethical discussion
» Good crash test results are considered
“prestigious” and bad results lead to a
massive impact in the public due to intensive
press coverage

15. «The big bang.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 15
The Brilliance crash test debacle.
» History of Chinese cars in European crash tests:
1.
automotive industry
and China
» » »
2.
european-chinese » 2005: Jiangling Landwind
automotive cooperations
3. » 2007: Brilliance BS6
product safety in the
automotive industry
» 2009: Brilliance BS4
4.
ethical discussion

16. Andreas Schwarzinger
Product Safety and European-Chinese
«The big bang.»
Crash test of the Jiangling
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 16
Landwind (2005).
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

17. Andreas Schwarzinger
Product Safety and European-Chinese
«The big bang.»
Crash test of the Brilliance BS6
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 17
(2007).
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

18. Andreas Schwarzinger
Product Safety and European-Chinese
«The big bang.»
Crash test of the Brilliance BS4
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 18
(2009).
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

19. Andreas Schwarzinger
Product Safety and European-Chinese
«The big bang.»
Crash test of the BMW 3 Series
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 19
(2001).
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

20. «What it‘s all about.»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 20
Table of contents.
» ethical dicsussion
» ethical dicsussion

21. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 21
product safety issues.
» First of all: Be realistic about the Chinese
1.
automotive industry
and China
» » »
2.
automotive industry’s future!
european-chinese
automotive cooperations
» It has just started
3.
product safety in the
automotive industry
» The industry is too unconsolidated
4.
ethical discussion
» The technological gap will not be closed by tomorrow
» Product quality and safety is bad
» Automotive joint ventures in China do not help the
situation

22. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 22
product safety issues.
» So obviously, the Chinese automotive industry
1.
automotive industry
and China
» » »
2.
needs help
european-chinese
automotive cooperations
3.
» Why should European manufacturers help?
product safety in the
automotive industry
» If they would help, they would just feed a sleeping
4.
ethical discussion
giant

23. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 23
product safety issues.
» On the other hand:
1.
automotive industry
and China
» » »
2.
european-chinese » Europe had more than a 100 years to get things right,
automotive cooperations
so just let China have its own 100 years
3.
product safety in the
automotive industry
» Foreign manufacturers alone probably could not
4.
meet the still growing Chinese demand alone
ethical discussion
» Chinese customers probably will not accept foreign
cars and brands
» China has to keep the impressive economic growth of
the past, the automotive industry is a vital part of it

24. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 24
product safety issues.
» All of this bases on a questionable assumption:
1.
automotive industry
and China
» » »
2.
european-chinese » Chinese customers and firms do see the need for
automotive cooperations
safer cars
3.
product safety in the
automotive industry
» This assumption is questionable, because:
4.
ethical discussion
» Still low traffic density in China
» Not much experience with car traffic
» Not much knowledge of the consequences of accidents
» Crash safety is an experience good

25. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 25
product safety issues.
» Ethical question:
1.
automotive industry
and China
» » »
» If European customers and firms know about
2.
european-chinese
automotive cooperations
3.
the dangers of car traffic and Chinese
product safety in the
automotive industry customers and firms don’t, …
4.
ethical discussion » … shouldn’t we tell them?
» … should we help them?
» … should we be forced to help them?

26. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 26
product safety issues.
» My point of view:
1.
automotive industry
and China
» » »
» Yes, we should help them, because
2.
european-chinese
automotive cooperations
3.
product safety in the » We know about the dangers of the car
automotive industry
4.
» European firms know how to make safe cars
ethical discussion
» Cheap (and unsafe) cars target mainly younger,
inexperienced customers and low-income classes of
the population
» They don’t care or don’t have the time, money and
information to check for the safety of cars

27. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 27
product safety issues.
» But: Shouldn’t we just let customers decide to
1.
automotive industry
and China
» » »
2.
either buy a safe but more expensive or a
cheaper, unsafe car?
european-chinese
automotive cooperations
3.
product safety in the
automotive industry » No!
4.
ethical discussion » Customers underestimate the dangers of cars
» Car purchase decisions are often driven by emotions
» Sales staff have incentives to keep quiet about unsafe cars
» Crash safety is an experience good
» Cars are like drugs or weapons!

28. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 28
product safety issues.
» But how should we or European car
1.
automotive industry
and China
» » »
2.
manufacturers help?
european-chinese
automotive cooperations
3.
» Version 1:
product safety in the
automotive industry
» Just sell the old car platforms to Chinese firms
4.
ethical discussion
» Would not change the underlying problem!
» Version 2:
» Promote the importance of crash safety
» Found a transnational, non-profit safety lab

29. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 29
product safety issues.
» Why a transnational, non-profit safety lab?
1.
automotive industry
and China
» » »
2.
european-chinese » Non-profit: Use all its incomes for R&D in automotive
automotive cooperations
safety  addresses hold-up problems
3.
product safety in the
automotive industry
» European manufacturers could share R&D costs and the
4.
safety lab could catch economies of scale
ethical discussion
» Fair prices for consulting services for car manufacturers
of developing countries (Brasilia, India, China, …)

30. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«What should we do?»
Course: Business Ethics in China
University of Zürich
Ethical discussion on China‘s automotive
Page 30
product safety issues.
» Why a transnational, non-profit safety lab?
1.
automotive industry
and China
» » »
» Because it combines economic incentives for
2.
european-chinese
automotive cooperations
3.
European manufacturers to help Chinese firms to
product safety in the
automotive industry make their cars safer to meet the ethical claim
4.
that every car buyer should have the right for a
safe car!
ethical discussion

31. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Let‘s copy a BMW!»
Course: Business Ethics in China
University of Zürich
Reasons why China can‘t copy European
Page 31
cars.
» Question: How can European manufacturers
1.
automotive industry
and China
» » »
2.
successfully operate in China and especially
within joint ventures without losing their
european-chinese
automotive cooperations
3.
product safety in the
know-how on how to make a good car?
automotive industry
4.
ethical discussion

32. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Let‘s copy a BMW!»
Course: Business Ethics in China
University of Zürich
Reasons why China can‘t copy European
Page 32
cars.
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
4.
ethical discussion

33. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Let‘s copy a BMW!»
Course: Business Ethics in China
University of Zürich
Reasons why China can‘t copy European
Page 33
cars.
» Why can’t the Chinese just perfectly copy
1.
automotive industry
and China
» » »
2.
European cars and sell them cheaper than the
originals?
european-chinese
automotive cooperations
3.
product safety in the
automotive industry
» Because they are more than just the sum of all parts!
4.
ethical discussion
» More specifically:
» European manufacturers limit the knowledge transfer
» Protectionist legislations and standards in Europe
influenced by the European automotive industry
» Emotional differentiation of European premium cars

34. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Let‘s copy a BMW!»
Course: Business Ethics in China
University of Zürich
Reasons why China can‘t copy European
Page 34
cars.
» Maslow’s pyramid of needs:
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
Need for self-realization
3.
product safety in the
automotive industry
Need for social awareness
4.
ethical discussion
Social needs
Safety needs
Phyciolocigal needs

35. Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
«Let‘s copy a BMW!»
Course: Business Ethics in China
University of Zürich
Reasons why China can‘t copy European
Page 35
cars.
» Automotive pyramid of emotions:
1.
automotive industry
and China
» » »
2.
european-chinese
automotive cooperations
We are purely emotional: Design, sound and colours
We are fun: Sportiness and fun to drive
3.
product safety in the
automotive industry We are superior: Obvious luxury
We are better: Technological leadership
4.
ethical discussion
We are green: Sustainability
We are familiy: Family orientation
We are safe: Crash safety
We are solid: Reliability
We are cheap: Get from A to B

36. «Any questions?»
Andreas Schwarzinger
Product Safety and European-Chinese
Automotive Cooperations in China
Course: Business Ethics in China
University of Zürich
Page 36
Questions, answers and discussion.