When Dealer magazine first interviewed David Shelburg in early 2005 his company had already been in business for 13 years, the oldest Chinese car import company in America. At the time, we grilled him pretty hard about claims of emissions certification and the like, which weren’t exactly accurate. While his competitors, mainly Malcolm Bricklin’s Visionary Vehicles, continued to make news, Shelburg’s China Motor Corporation has been quietly and steadily building its organization and getting its vehicles through the maze of regulatory requirements and signing up dealers and distributors. Here’s an update on a man whose background goes back to the old Kaiser-Frazer days.

David, for our readers not familiar with your name, please review your auto industry background.
I have worked for Kaiser-Frazer and American Motors. And I was one of Malcolm Bricklin’s first employees when he brought the Subaru 360 to the States in the ‘60s. Eventually I had a Subaru distributorship in the Southwest. We sold the Subaru distributorship in 1975. I started China Motor Corporation in 1992, and have been working since to import these vehicles into the US. We are not the same company that goes by the name of China Motors Corporation, with an “s,” of Taiwan.

Describe the status of China Motor Corporation today.
Our plan is to have some cars to dealers by end of the first quarter of 2007. We have a strong distributor network in place, and under Western China Motor Distributors are such dealer groups as the Chapman Group, which has deposits for each of the four dealerships it plans to open, two in Arizona and two in Nevada. John Mandella of Capitola Auto Mall, who you talked to last year, has a recently built multi-million dollar facility for our cars in Capitola, CA, near Santa Cruz. Also on board are Bob Silva of Bob Silva Ford in Chowchilla, CA, and Jeffrey Morgan at John Watson Chevrolet in Ogden, UT, among others.

We also are now in partnership with China Car Distributors, for 13 Midwest states. Behind China Car Distributors are its president Max Holmes and its executive vice president Don Bishop. Holmes is owner and president of Holmes Automotive Group, which operates Chevrolet, GMC, Honda and Hyundai dealerships in Des Moines, IA. Bishop has more than 35 years of wholesale experience in the automotive industry with General Motors. [Editor’s note: learn more about China Car Distributors at www.chinacarsusa.com].

[Bishop told Dealer magazine that China Car Distributors currently has signed on 34 dealer groups – including the Germain and Bob Rohrman auto groups, he said – representing $4 billion in annual revenue, to represent China Motor Corporation vehicles in the distributor’s territory. He also is president of Southeast China Motors Distributor, now with five dealer groups and he is a majority stakeholder with David Shelburg in Northeast China Motors Distributor, with three dealer groups.

[“The key to China Motor Corporation,” Bishop said, “is the depth and breadth of the organization. I would put it up against any dealer network in the nation, including Lexus, and the China Motor product is simply the icing on the cake.

[“The other companies set up to import vehicles made in China often have little experience in creating organizations and are counting on the product to carry the dealers. Our strategy is to create the organization first and then the flow-through is the product.”]

The Port of Stockton in California is still interested in working with us. [Last year, as part of our reporting on China Motor Corporation we did speak to authorities there. Mark Tollini, deputy port director, Trade and Operations, confirmed discussions with Shelburg. Tollini said then, ‘We are very much interested in pursuing this business. It is very early on yet.’ He said no dock construction would be necessary to support shipments of Shelburg’s vehicles at the port, but that support facilities – preparation, parking and distribution facilities – would need to be built. He added that any such movement in that direction was at least 12 months off ‘at a minimum,’ at that time.

[Bill Lewicki, director of marketing for the Port of Stockton confirmed for this article that China Motor has been in discussion with the port on an ongoing basis. The port acquired 1,440 acres from the Navy some time ago, formerly called Rough and Ready Island, which in exchange for the gift is charged with finding businesses for the site to improve the area’s employment.

[A parcel of this property, 350 acres, is designed for inbound and outbound rail and truck traffic, and could serve as a staging area for Chinese vehicles received by the port and destined to China Motor distributors. He also noted, as Shelburg did in this interview, that one part of the complex resides in a foreign trade zone that offers opportunities for China Motor to set up and actually manufacture electric vehicles from parts imported from China.

[While Lewicki said no formal agreement exists between the port and China Motor, discussion between the parties does continue. He indicated the next move is China Motor’s, to secure an auto processor to receive cargo from incoming vessels, work with stevedore companies to have the vehicles off-loaded and then moved to a future China Motor staging facility. Vehicles then would be transported to distributors via rail or truck transporters. Shelburg said his company does have a letter of agreement with UPS for UPS to provide both the auto processing function as well as handle vehicle transportation to distributors.]

What is the status of emissions and safety testing for your vehicles? When we talked about this in the spring of 2005 our research contradicted your status of these essential steps.
I’ve learned a lot about these processes since then. We have been working with two testing facilities, FEV Engine Technology, Inc., with testing facilities in Auburn Hills, MI and Dallion, China, and with E-DAG, a German company in Shanghai, China, to make sure these vehicles are ready for the US market. [Dealer magazine contacted FEV Engine Technology at its Auburn Hills facility. CEO Gary Rogers confirmed that China Motor’s Saibo vehicle is in testing at its facility. Due to confidentiality with China Motor, Rogers would not reveal status of testing.]

These companies are finishing with what they call a “preliminary analysis” of our Chinese vehicles for environmental and safety compliance. Their findings will go back to our Chinese manufacturers to make the recommended alterations. Afterward, we’ll send two cars to the EPA and four cars to the DOT for certification.

Every week we get reports from FEV and E-DAG. For instance, one of our cars, called the Saibao, a vehicle about the size of the Acura, was in their labs and every nut and bolt was scattered around the room for examination. They suggest alterations like, “This brace should be doubled; this spot-weld mark should be every three inches” which, as I said, go back to the factory for alterations to the design.

I know what has to be done, so I stepped up and hired FEV, the testing company GM and the other manufacturers use. Hell, if I’m really going to do this, why don’t I put my money out there? It’s about a half-million dollars on this first swing.

I grant it appears your structure is further along than it was, but the vehicles you promised last time would have been on US shores last October still aren’t here a year later. Let’s be realistic now; when will your vehicles be here, ready for sale?

As I said, by the end of first quarter next year. I feel very strong about that now. I can tell you why. One of the vehicles they did in China in a world test, it got a 4-Star rating along with a Jeep Cherokee and the BMW X5 and that really made the Chinese chests swell. The vehicle is made by one of our manufacturers, Great Wall. It’s called the Hover and it’s a small SUV-type vehicle.

Who are your other manufacturers?
Brilliance, and a company in Harbin province. This latter company manufacturers two of our vehicles, the Lobo, a Chevrolet-Aveo type entry, and the Saibo, a Camry, Accord, Sonata sedan. Great Wall makes the Hover, as mentioned, and the Brilliance [Shenyang Brilliance Jinbri Automotive Company, Liaoning province] make the Europa and the M-2, a small Chevrolet Aveo-type sedan. The Europa is designed and engineered by BMW and assembled in China. All these cars feature European design and engineering.

What consumer feedback do you get about your cars?
We had a Europa sedan model here on display the public just flipped. A Toyota and a Nissan dealer both saw it and said, “We better join you.” This car is about the size of an Altima or small Mercedes and built like it. It’ll MSRP around $20,000, so we’re up in the neighborhood of Kia and Hyundai now versus downstream a little bit where we were before with some of these Chinese cars.

Here’s what the Chinese have told me and you can quote this on it. They said, “David, the cars that you will get will be all the way from 20 to 30 percent lower than the Koreans’ or the Japanese’.” Korea helped our cause because those companies proved someone could take on Toyota and the rest. So the American people are already saying, “OK, let’s see what he [Shelburg] has from China.” The reason we’re dragging our tail is because we want cars like Europa that are still in process.

We had represented the Geely car company, but we dropped it after it brought cars itself to the Detroit Auto Show last winter without us, contrary to our agreement with the factory. I advised the factory the car was not ready for US display, but it was brought over anyway and it did not show well. The feedback I got from China was this embarrassed the Chinese government, and you don’t do that. Later the Chinese said, “David very smart man. David not hurt China’s image.”

It is the Saibo that is currently under emissions testing and safety testing with FEV and E-DAG.
China Car Distributor’s Bishop, when asked his confidence level about the cars from China Motor Corporation, whether they would be on US shores per Shelburg’s new timetable, he rated it a nine on a 10 scale. He believes the vehicles will arrive thusly: Saibo by end of first quarter, Europa four months later to be followed by Hover, and the Lobo. The M-2 is expected after that.

Why do you suddenly have this traction?
Dealers and consumers are seeing these cars here, and some of the confidential results of our FEV tests have helped me see that I’m seeing daylight now. You know, I took some hard shots out there at the beginning, but I’m persistent. I’m here. I’m going to make it happen!

What obstacles do you still face?
I call them factory hiccups. The dealers love our cars. Most of them say they like my no-nonsense way of doing business. We’ve signed some big dealers. They’re with me. The downside of this is politics, the buddy-buddy factor [domestics and other manufacturers’ lobbying], which will pull every trick in the book, and I’m ready for it, to stop me.

Are you concerned about fuel prices as a challenge?
No. Import rules, yes.

Changing gears, let’s chat about Malcolm Bricklin and his Visionary Vehicles venture. Last year he hired Pierre Gagnon, who left shortly afterward, and then a Bricklin aide, Bill Fisher, also left. And then Chery, one of Bricklin’s Chinese manufacturers, was offered $200 million by billionaire George Sores, possibly as move to gain control of Visionary. The following month Chery announced internal troubles and pushed back any possible US delivery of its vehicles until 2009 or so. What is your perspective on these activities?

Fisher called me a couple of times to get together; our conversation was very friendly, and then I read where he left Bricklin and now is trying to import cars from Geely Automotive in competition with me. Now, Automotive News covers all of these others goings on, but hasn’t paid any attention to me, until recently. About three weeks ago an Automotive News writer contacted us asking about our vehicles at FEV. We hung up on him. I’m not going to get along with that SOB [Automotive News Publisher and Editor-in-Chief Keith Crain] if it kills me. Yet only now is he [his publication] calling; I told him one thing, that you’re [Dealer magazine] the one publication I’ll talk to. You’re like me, a renegade; you’re going to say what you want.

I do believe that Soros is trying to make an end run around Bricklin. And I understand how Bricklin must feel about it. I know the hard-knocks. But I’m the importer that’s way out in front. But Bricklin could make it. Don’t count Malcolm Bricklin out. I like him personally and I enjoyed my time I worked with him at Subaru years ago. I think Bricklin’s problem is he’d got himself surrounded by a bunch of yo-yos who don’t know s_ _ _.

As we asked last year, David, why should dealers invest in China Motor Corporation for a franchise?
China’s going to be here whether we want it to or not. Even the US government wants China to be here. Everybody knows these vehicles are going to be quality cars. The dealers who’ve visited us, who’ve seen our cars, get angry with us – they want the cars yesterday because of their quality and their price.

When you talk to financial institutions and you mention China you’ve already cleared 50 percent of the challenge and then they want to know who you are. We’re this close to creating a China Motor’s captive and all the necessary product liability and recall insurance, plus parts warehousing requirements to operate a car company here. I’ve also agreements with General Electric and GE Motor Club of California to provide roadside assistance and towing services for our vehicles. I’m covering every base so this thing won’t backfire.

Now each dealer’s goals are different, but we all see what is happening with China. Dealers have seen the results of cars from Korea and a lot of them have the same gut feeling about Chinese cars as they did about Korean cars and 35 years before with Japanese cars. I don’t solicit for dealers; they hear about me by word-of-mouth. They say, “David, we came out and met you. We love your no-nonsense way of doing business.”

These are the dealers we’re going into business with. We’re putting together franchise packages like the majors have never seen. The dealer agreement requires $65,000 to $95,000 upfront per market (depending on market); a showroom of 800 sq. ft. minimum for four vehicles; 800 sq. ft. service area with two bays and two technicians; 750 sq. ft. of parts; two trained sales consultants dedicated to the product; 20-unit planning potential capital requirement of $500,000 and a $250,000 minimum floor plan, and a $250,000 letter of agreement.

Each year we, with our dealers, start planning for profit. Dealers tell us they’ve never seen anything like this from their manufacturers before. Now, I’m not as smart as the rest of them out there. I’m just an old country boy, but how can you plan a year when you get two price increases in 60 days? I can’t figure that out. Our prices will be guaranteed until December 31, midnight. We’re going to walk these dealers through this and we’re going to get down to basics.