In 1983, the Detroit-based American Motors Corporation (AMC) signed a joint venture agreement to produce jeeps in China. AMC executives had dreams of a low-cost manufacturing hub and early access to potential Chinese automobile buyers. “Everyone salivates when they think of the China market,” AMC Chairman and CEO W. Paul Tippett, Jr. told The Wall Street Journal at the time the deal was signed.

There was (at least) one problem. The average cost of an entry-level AMC jeep in 1983? About $7,000. The average annual salary in the People’s Republic? About $350.

In a decade that gave us questionable business decisions including New Coke, the DeLorean and banks loaning Donald Trump money to build casinos in Atlantic City, AMC’s venture stands out for its collision of bad math, divergent aspirations and intercultural misunderstandings. James Mann’s account of the debacle, Beijing Jeep: A Case Study of Western Business in China (Touchstone Books, 1990), was an instant classic — and remains so today, as another chapter in a timeless story of Western fantasies foundering on the rocks of Chinese reality. Mann’s book asks:

Could $100,000-a-year executives from nations of wealth and abundance blend into a single management team with $75-a-month cadres from a nation of poverty and scarcity? Could private corporations whose aim is to maximize profits join together with the industrial subunits of a socialist state geared toward maximizing output, control, and social order?

To use a well-worn idiom: “same bed, different dreams” (同床异梦). Yet Beijing Jeep, at least in the beginning, reads more like “same bed, but one partner is also sleeping with the Chinese military.” While AMC hoped to sell jeeps to the masses, their Chinese counterpart, Beijing Automotive Works, had a different priority: reverse-engineer American auto technology and jump-start China’s own automobile industry, starting with an upgrade for the People’s Liberation Army’s fleet of four-wheeled military vehicles.

It soon became clear that both sides rushed into the partnership without fully disclosing — or even completely understanding — what they themselves wanted from the joint venture. AMC (and later Chrysler) altered their strategy when it became apparent that market conditions and economic policies, notably the restrictions on converting RMB profits to USD, disrupted their initial plans. Chinese managers at Beijing Jeep, the name of the joint venture, grew frustrated when they believed AMC officials were attempting to change the terms of the original deal. 

AMC found themselves following in a long tradition of Western delusion about the Chinese market and the magical thinking of “if only.” Charlie Brown will finally kick the football if only Lucy doesn’t snatch it away this one time. Inevitably, Charlie Brown, the eternal optimist, lands flat on his back. Except in this version, Lucy then takes the football home, reverse-engineers it, and starts selling cheaper footballs back to Charlie Brown, leading to a trade war in another 40 years. Good grief, indeed.

Some puzzling decisions by AMC executives compounded this mismatch of motivations. For example, they took the Beijing Jeep management team to a glitzy automotive convention in Las Vegas — complete with highly-paid entertainers and lavish events for auto dealers — and then told them that spending $1 million on a convention was a brilliant business model, but designing military vehicles for the People’s Liberation Army was not. AMC was effectively saying to their Chinese partners: “Sorry, we can’t help you build better army jeeps, fellas, but how would you like to meet the surviving members of The Beach Boys!” The Chinese side was understandably outraged.

Moreover, AMC, like many foreign companies in China in the 1980s, was overly cavalier about the challenges of doing business in a country undergoing nearly unprecedented transformation. Getting in early and establishing a presence often mattered more than a well thought-out business plan. Short-term costs were justified by the potential for long-term profits that seemed to exist beyond an ever-retreating horizon line. 

Ultimately, companies learned that just being in China, or even being there first, didn’t guarantee success. AMC found out the hard way that it wasn’t the only suitor in the palace when representatives from Japanese car companies and executives from Volkswagen came to China to launch their own joint ventures.

American Motors Corporation found themselves following in a long tradition of Western delusion about the China market.

For all of its timeless lessons, Beijing Jeep is also a period piece. James Mann was an experienced journalist based in Beijing for The Los Angeles Times. He brings a reporter’s immediacy to this book, alternating between the ongoing and increasingly complicated saga of AMC’s joint venture with Beijing Automotive Works and contextual chapters on the social, economic and political change in China during this crucial period in the country’s modern history.

Mann describes a Beijing unrecognizable to foreigners who live and work there today. In the 1980s consumer goods, especially Western products, were few and hard to come by. Westerners at the joint venture complained about the accommodations they were provided, failing to realize that their housing options were far superior to anything their fellow Chinese executives could have imagined. Western-style accommodations that could cater to the precise whims of American executives were scarce and extremely expensive.

When they first arrived in Beijing, AMC executives were also dismayed by the amount of work that needed to be done to start production. They complained about the poor state of even the most advanced manufacturing plants in China, the casual attitude workers had toward safety standards, and that almost every supervisor’s office had a bed for what was apparently a customary nap. This was not the way things were done in Detroit.

For their part, Chinese managers and workers at the plant found the Americans often tactless in their direct communication style and ignorant of the most basic understandings of how things worked in China, especially in Chinese enterprises. Chinese workers and executives found the Americans to be patronizing in their tone, while the AMC team grew frustrated at being lectured about how they didn’t understand China.

Opportunities to bridge the cultural divide and help close the perception gap were few, as even the most basic relationships between Chinese and foreigners were carefully managed in the 1980s. Visiting a Chinese friend or colleague at home was rare, and even visits to businesses were carefully choreographed performances staged in interchangeable conference rooms of oblong tables, with too many chairs, tea cups and paper doilies.

It was even tougher for executives with families. Mann recounts an anecdote in which the American Club, the social organization for the U.S. business community in Beijing, sponsored a Valentine’s Day dinner at the newly opened Great Wall Hotel. The foreign guests and their spouses competed in a contest to see who could complete the best “Roses are Red” verse. The winning entry was simple, direct and telling. A wife wrote to her American businessman husband: “Roses are red, violets are blue. You brought me to China, but I still love you.”

But cooperation isn’t always about managing cultural differences. Personalities matter too. One of the more colorful characters in Mann’s story is the AMC executive Don St. Pierre. When negotiations with Chinese partners stalled over a range of issues — access to foreign exchange, operational control or what he viewed as unworkable management from Beijing Jeep’s Chinese leadership — St. Pierre didn’t hesitate to go public. He bypassed layers of diplomacy and corporate etiquette, airing grievances in international media. He also recommended to AMC brass that the company consider pulling out of China entirely.

The standoff finally broke when a cadre ex machina missive came down from Zhongnanhai. Future premier Zhu Rongji, then with the State Economic Commission, announced that Premier Zhao Ziyang had appointed him to resolve the impasse. AMC was urged to send a senior delegation to reopen negotiations. The intervention of top Chinese leaders transformed Beijing Jeep from a troubled experiment into a model joint venture — a not-quite-Potemkin enterprise that would serve as a showcase for the policies and proponents of the Chinese government, advocating for greater reform and opening, and proving that China was open to serious business. St. Pierre, once a combative outlier, was transformed into the poster boy for Sino-foreign cooperation (and resurfaced in the 1990s as co-founder of China’s largest wine importer).

By the end of the decade, many of the American executives had grown increasingly doubtful about the long-term prospects of China’s auto sector. They remained convinced that Chinese efforts at self-sufficiency would fail — that domestically produced cars, if fully Chinese-made, would inevitably fall behind global standards. It was commonly believed that Western know-how would always be indispensable, and that foreign brands were in China to stay.

History has proven otherwise. Today, Chinese electric vehicle makers such as BYD are preparing to storm Western markets with the kind of technological confidence that AMC executives would have found inconceivable. The student has not become the teacher, but has succeeded in ways that Western executives and political leaders are struggling to comprehend.

Mann describes a Beijing unrecognizable to foreigners who live and work there today.

In 1983, AMC thought it could build a bridge between Detroit and Beijing, and got a crash course in how deep the cultural and ideological divides really ran. Forty years later, companies like Chinese battery company Gotion are pursuing the same dream in reverse: building factories and chasing market share in the U.S. and other overseas markets. But like AMC before them, Chinese firms are learning that access doesn’t equal acceptance. If Beijing Jeep is a 1980s tragicomedy of Western overreach, we are now living through the awkward sequel with a different cast but the same plot — replete with naïve optimism, awkward dinners, public protests, hyperventilating media coverage, and some poor mid-level executive trying to explain to skeptical locals that his company isn’t part of a foreign conspiracy to destroy their way of life.

Beyond the question of technical capabilities, Mann’s book also examines the future political trajectory of the Chinese state itself. From his vantage point at the end of 1989, in the aftermath of the violent suppression of the Tiananmen Square demonstrations that June, Mann was skeptical about major political reform. Even if some leaders favored liberalization, he argued, the Chinese government’s resistance to change would likely push China inward or toward presenting itself as a third way between capitalism and communism.

As he would again in his prescient 2007 masterpiece The China Fantasy: Why Capitalism Will Not Bring Democracy to China, Mann concludes Beijing Jeep with a warning to Americans that the potential for China to change was being overestimated, and that that the U.S. should be prepared for a China that was neither weak nor becoming more like them, but both strong and determined to develop in its own way.

If the vast Chinese market emerged in full, it would not be captured by the Westerners who had chased this dream for over a century. That market, Mann predicted, would belong first and foremost to the Chinese themselves. ∎

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