Bringing MG back to America via the People's Republic of China

By Michelle Krebs

Duke T. Hale is the newly appointed president and chief executive officer of MG Cars North America/Europe, Inc. With more than 30 years in the U.S. auto industry, working for domestic as well as European and Asian brands, Hale is well-known in the business. Now living in Georgia, Hale started his auto career in 1973 with Ford after his graduation from Ball State University in Indiana. He also worked for Chrysler. In the 1980s he went to Volvo, after which he worked at Mazda and Isuzu. Most recently, Hale headed Lotus Cars and Lotus Engineering, two separate U.S. companies.

In July, China's Nanjing Automobile announced Hale's appointment, along with the formation of MG Cars North America/Europe, Inc., and plans to bring back the famed British marque and its sports cars. MG began selling cars in the 1920s, hit its stride with its popular sports cars in the 1940s and 1950s, but left the U.S. market in 1980. MG continued to produce cars in Europe until 2005 when MG Rover went bankrupt and Nanjing bought its assets.

Nanjing's plans call for MG vehicles to be built in Nanjing, China, Nanjing's hometown; at MG Rover Group's Longbridge factory near Birmingham, England; and at a new U.S. assembly plant to be built in Ardmore, Oklahoma.

Duke was interviewed by Inside Line columnist Michelle Krebs by phone shortly after the announcement.

Q & A with Duke T. Hale

Nanjing Automotive's Chinese executives were quoted in the British press as saying plans to build a plant in Oklahoma were merely an idea. Is the Oklahoma plant and research and development center going to happen?
Absolutely. It's a lot more than an idea. I'm not saying Nanjing executives were misquoted but I'm not sure they understood the question. In all fairness, Mr. Yu [Nanjing President Yu Jianwei] doesn't know the West. In fact, his trip to Oklahoma was his first visit to the U.S. in his lifetime. He stood beside me in Oklahoma when we made the announcement.

Then it is a done deal?
There is a lot of work to do and there are some uncertainties, such as the precise location in Ardmore [Oklahoma] and other specifics. But it's not an issue about whether or not we're going to do it.

What products will each plant produce?
Right now, Nanjing is looking to build three sedans in China. For lack of another description, they'll be small, medium and large. In the U.K., we will build a modified version of the MG TF roadster. In Ardmore, Oklahoma, we will produce a coupe variant of the roadster. Those will be the products initially.

What is the rollout schedule of those models?
We're working through which products we will begin selling in 2007. The roadster will launch first in the U.K. and the rest of Europe in the second or third quarter of 2007. The coupe won't be built until 2008. The U.S. will have nothing to sell until May-June of 2008, when the roadster will be here also.

Will you sell the sedans, like those made in China, in the U.S. and Europe?
They will all be sold in Europe. We haven't decided what will be sold in the U.S.: maybe one or two products initially, with others coming behind them.

What is your sense - and do you have any data to support - if MG has any brand equity left, particularly after being out of the U.S. since 1980? And if it has any, who is that equity with? Mostly older people?
I have looked at research done by a European-based firm that definitely indicates there is positive equity in North America with the 40-plus crowd. It certainly has more positive equity in Europe, where MGs were sold up until about 10 months ago in the range of 120,000 cars a year. It's been 25-plus years since the MG was sold in North America so people as young as in their late 30s and early 40s still remember the brand. Younger than that, they don't. But look at the Mini Cooper. That was never as strong a brand as MG. I hardly remember the Mini Cooper. But look at what they've done, selling 200,000-plus a year. I think we can learn from Mini on how to not only appeal to the 40-plus crowd, but also how to tap into the 22-40 crowd. We'll tear a page out of Mini's playbook.

Which page will you tear from Mini's playbook?
They did a lot of public relations work. The vehicle has to be right and has to appeal to different folks. I think that will be there with MG. But we want to use PR as one of the mechanisms to build some power in the brand prior to launch as Mini did. We'll look at how to reach the younger crowd by more effective means than traditional marketing. I believe PR event marketing, sponsorships, the Internet and Web sites like MySpace.com are the way to reach them.

Why are you building the roadster in the U.K.?
One reason is that it's a British car. It's a core vehicle. You expect it to be British. It's what MG is known for. Second, we are also committed to the U.K. We're truly committed to jobs in manufacturing, sales, marketing and distribution in the U.K. and Europe. We need a stronghold in Europe of 100,000-130,000 vehicles a year. Lots of the major components will be sourced in China to help on price.

Why Oklahoma? General Motors recently closed the state's only assembly plant there.
The opportunity in Oklahoma is immense. The Ardmore Air Park, where we will build the coupe, is a 3000-acre parcel. Some of the land is sovereign Indian state. We are partnered with Mark Nuttle. [Editor's note: Nuttle is manager of the Oklahoma Sovereign Development LLC, which has a joint venture with the Chickasaw Nation to develop the land into an international trade and distribution center. Nanjing would benefit from tax advantages, including property tax exemptions, accelerated tax depreciation and employment tax credits if the tribe purchases 650 or more acres for the Ardmore Airpark and leases it to Nanjing.] Let imagination run and you can think of creative ways that allow the business to be more efficient and profitable to the point that one might be able to build vehicles in Oklahoma nearly as cheaply as China.

What is your plan for dealerships? How many dealers will you have?
About 300-350 in the U.S. In Europe, we'll use an assortment of importers and dealers. We won't ask our dealers to put millions of dollars to build drive-in theaters either. Likely we will have a dealership with an exclusive showroom for MG next to another brand, and they will share the back office, service and parts operations.

How and why did you become involved with MG?
This kind of opportunity has been a career-long dream. I did some consulting work for MG Rover through the previous chairman of Malaysia's Proton. He convinced me to take over the U.S. Lotus operations. I then transitioned the MG Rover work to a friend I'd met at church when I lived in California, Michael Davis of Davis Capital [one of the investment firms in the Oklahoma MG project]. When the purchase of MG Rover's assets by Shanghai Automotive Industries Corp. fell apart, Nanjing grabbed up Michael and me because we'd worked on the project.

What's your vision for this venture five years from now?
My vision - a vision I had long before this company - is to create a world-class company and world-class cars. What that means to me is this: I want the people that work for our company to view it as one of the top 100 places to work on their continent - North America or Europe. Second, when the National Automobile Dealers Association - and the equivalent in Europe - does a dealer attitude survey, I want our company to be in the top 10 in dealer attitudes. Third, I want our products to be in the top third of quality surveys. I genuinely believe we'll be successful if we have enthused employees and dealers who truly take care of the customer, and the customer thinks we build a pretty darned good-quality car and they feel the dealership and company truly takes care of them. They'll tell their neighbors and friends, and they'll buy again themselves.


Links referenced within this article

Features
http://www.edmunds.com/insideline/do/FeaturesLandingMini Cooper
http://www.edmunds.com/used/2006/mini/cooper/index.html