Imported car parts are our biggest headache, says Jay Hunt, local suppliers are very responsive. To our surprise, however, the cost of localized production is much higher than buying from overseas. The reason is that although labor costs are low in China, wages comprise only 20% of the cost of producing car parts. Small-scale production in China makes production costs very high. The deputy general manager, Laurence Zahner said, Only if the price of domestic parts drops 30% shall we be able to qualify for the international market.
Thankfully, a solution has appeared. Foreign car parts makers are coming to the Yangtse River Delta to set up joint ventures. Shanghai GM Buick will depend on those parts makers for car parts. Perhaps the Buick plant will not worry about the agreement with the Chinese partner any longer. The agreement says that in the first year of production, the Buick plant must have 42% of locally made parts, and in the second year, the locally made parts rise to 60%, and in the third year, 80%.
1. What was the biggest issue in the negotiation between the Chinese government and General Motors?
A) Annual production of cars.
B) The location of Shanghai GM Buick.
C) Car parts and their shipment.
D) The price of domestic car parts.
2. How many car parts is a car made up of?
A) 23,000
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