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Chinese 'theft' leaves VW competing against self

The Local · 28 Jul 2012, 12:14

Published: 28 Jul 2012 12:14 GMT+02:00

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Volkswagen managers in China have learned that FAW is allegedly imitating key components in a total of four patents, including the EA 111 engine, for use in its own models, according to the Handelsblatt newspaper on Friday.

State-owned Chinese car manufacturer FAW, in which Volkswagen owns shares, has apparently copied patented part of the successful VW engine and intends to use it in their own cars - which will then compete with VW models in China, wrote the paper.

The report further claims that VW also suspects FAW of planning to make a copy of the VW transmission MQ 200 without permission or a license, despite what a VW spokesman described as “long years of trusting collaboration” between the two manufacturers.

VW believes their transmission will be used in the new FAW Besturn B 50 small car, which will be exported to Russia, where VW is currently pushing for market growth with subsidiary Skoda. VW could therefore be in danger of coming into direct competition with its own technology.

The problem isn’t specific to VW, Willi Diez, automobile expert and head of the Nürtingen Institute for the Automotive Industry (IFA) told the DAPD news wire. “Transfers of technology on the edge of patent protection” when doing business with Chinese partners are nothing new, he said.

At the same time, he added, no European manufacturer can afford to stay out of the colossal Chinese automobile market for fear of patent theft alone. Those who have hesitated too long “are hardly ever in the Chinese market today,” said Diez.

VW, while risking patent theft, has certainly managed to gain a strong foothold in China, selling 1.3 million cars there in the first half of this year – that is around a third of all its global sales.

As with all foreign companies operating in China, VW is only allowed to manufacture in the country in collaboration with domestic partners – in this case state-owned manufacturers FAW and SAIC.

Story continues below…

But the Chinese state is pushing for technology transfers within these joint ventures with a view to building a self-sufficient car industry. VW has so far reacted mildly, saying it is looking into the case, in a clear attempt to avoid open confrontation with China.

DAPD/The Local/jlb

The Local (news@thelocal.de)

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Your comments about this article

13:25 July 28, 2012 by Herr Rentz
The Chinese steal just about any design they can get their hands on. Why work for it if you can get it for free?
13:43 July 28, 2012 by smart2012
Funny that this comes right after marchionne's statement. This is a hint for VW. Mass cars for china will be made by Chinese company in a very near future. And also for Europe...
14:03 July 28, 2012 by Berlin fuer alles
What else do they expect. If the Chinese make products for companies like Apple, Dell etc what is to stop them making their own cheaper versions and flooding the market? Copyright laws may curtail it somewhat by not allowing such products imported into the EU or USA but this problem will eventually negate the benefit of cheaper labour in China. Somewhat serves these companies right for the mass lay-offs they made so as to seek higher profit margins. Until the Chinese play the game by the same rules as the rest of the world, globalisation will not work.
17:39 July 28, 2012 by Anth2305
It would appear that in their profit driven expectations of breaking into the world's biggest market, car makers are falling over themselves to get a slice of the action in China.

However I can't help but wonder if some of our major European vehicle manufacturers aren't in the long term shooting themselves in the foot, given their rush to supply the technology, research and development and the setting up of automotive production facilities in China.

If we aren't very careful, it will eventually turn out to be a rerun of what the Japanese did to our home grown vehicle and electronic manufacturing industries around 40 years ago, only this time it will be a whole lot worse.
18:47 July 28, 2012 by wasserball
If you want in, your stuff get stolen. If you don't want your stuff stolen, don't go in. You are paying the piper either way.
19:09 July 28, 2012 by zeddriver
And once China has stolen enough to be competitive with the mainstream world market. They will then ban competitors from theirs. Sneaky little red devils. But smart. Using the blind greed of others to their own advantage.
20:24 July 28, 2012 by joysonabraham
What is the point in keeping your patents out of reach, when you can't sell as much as when you share the tech. Keep the patent and sell 100 cars, share the tech and sell 100,000 cars. VW knows how to do business.
20:59 July 28, 2012 by zeddriver

VW could have done that on their own. Following the Japanese model of the 70's. A Reliable, Well made car with out a huge mark up. Trouble is. The USA and Europe has decided to give up their industrial base. And send it to communist China. The Chinese government WILL eventually have most of the worlds heavy machine factories in their country. At which time they will tell everyone to take a p**s. Were the boss now. The USA and Europe will just be a service industry cleaning hotel rooms and cooking Schintzel for the Chinese.

But it's no ones fault but our own. Our western governments are so short sighted. We gave the Chinese the keys to the vault. And the pin number to the bank account. Then we act surprised that we are missing our secrets.
21:14 July 28, 2012 by wood artist
While I don't for a moment condone this sort of thing, the fact is that if you chose to take your manufacturing overseas, usually to profit from the lower labor costs, you're opening yourself up to these situations. We already know that the Chinese, in their haste to somehow assert the power of their population, will cut any corner and steal any innovation...and they've been caught Red Handed (no pun intended...sorta) time and again. Lead paint, adulterated milk, rampant pollution, suicides by factory workers, inhumane working conditions...the list is long. Pirated CD's and DVD's and just about everything else. Heck, even complete copies of Apple stores.

If you deal with the devil he gets to call the tune. China's phenomenal GDP growth can't be sustained any other way. Maybe it costs the rest of us a bit more to keep the jobs at home, but in the long run, until the whole world ceases enabling this theft, it will continue. When there is no penalty, there is no incentive to change your actions.

21:25 July 28, 2012 by joysonabraham
Business is always about finding the best possible way forward. Please don't forget that china is not the US or the Europe, the Japanese saw when they came in. Starting from infrastructure, potential, number of customers(compared to other countries at that time) everything is totally different. Which warrants totally different means to go forward. Past showed us many successful and failed ways to follow. Those ways may give the same results only in those settings. No guarantee the old ways will work in the new world. One day Chinese labour market will also become expensive to tap. You cant expect china to produce cheap labour for ever, that will happen only if china stumbles in its way forward. Its in fact good if all markets level up and have an economic powerhouse in that part of the world , everywhere if possible especially Africa.
21:53 July 28, 2012 by catjones
Talk about jumping to conclusions. It's well known that China sets conditions to foreign mfg in their country; one of which is access to mfg practices and product specifications. It's the price of admission and as the articles states, no one is forced into this market. It's not theft. It may be patent infringement, but we don't know what the contracts state, so before we defend VW (as if they don't have enough lawyers already) these are just allegations.....as if they didn't see it coming.
23:01 July 28, 2012 by zeddriver
@joysonabraham, catjones

I see it in a different way. The patent issues while a thorn in VW's side is not the big issue.

Way back when Nixon started talking with China. The thought was that if we could invest in China. It would some how tame the wild commie beast so to speak. They are still a hard line ruthless regime that cares not one wit about workers rights, Environmental issues, Trade agreements, Product safety. And putting more and more high tech factories in China that make machines not just toys. Will not lead to anything good for the west. So what if VW has lawyers. Do you think the Chinese government is afraid of them. When they have enough of our former industrial base within their control. They can and most likely will just tell the foreign factory managers to go home or be shot. this factory is now the property of the peoples party.
08:50 July 29, 2012 by ND1000
Didnt these business execs from VW, GM, Apple etc. learn the story of Faust in college? This situation isnt shocking at all. The only shocking part is that these powerful multinational companies and powerful governments allow this crap to happen. The press needs to report this stuff as much as possible to let people know what a dangerous game their leaders are playing.
11:30 July 29, 2012 by karldehm
And the Americans, British, Germans and other nations of the world don't steal patents?

Get serious. This king of things has happened all the time so why be surprised when the Chinese do it.
11:48 July 29, 2012 by joysonabraham

Then they will have the same dilemma with their huge factories and workers as what the west have with shelved patents or under utilized patents. What they will do with the factories. They need the west east and every other region to buy what comes out of these factories. I think the Chinese know better than anyone else what will happen. Because they know what happend when Stalin pulled out all his Tractors which he gave china after the schism among the communists. Just ended up as mountain of waste.
15:30 July 29, 2012 by zeddriver

My point being that China has been for a long time a country with big numbers. But very much lacking in front line tech. due to trade sanctions put in place to try and convince the hardline government to change. I think that there would have been a war between China and the west at large. IF China would have had the tech know how to really arm their soldiers properly. By building high tech. factories and handing over patents. Along with Clinton handing over guidance technology. We in the west have given them what they have lacked for so long. The means to build things other than cars and toys, clothes. I care not one wit about China's future cost of employment in those factories. As It won't happen like in the west. Labor unions will not be allowed. The people's party will require you to work at what ever wages they set. Or maybe they will let you survive if you toil in their factory.

Even though the Chinese government has allowed some to enjoy a taste of capitalistic consumerism. The government at heart is still a hard line communist regime.
11:31 July 30, 2012 by michael4096
It's the way of the world - karldehm is correct. Britain did it to France and then a very young USA to Britain and so it goes. Where did Germany get its technology?

The problem appears worse due to the patent system at the moment. Patents are far too easily awarded and have effectively debased themselves so far nobody can take patent 'theft' seriously anymore. There is very little that is truely original in the vast majority of today's patents. (Witness: Apple's 'rounded corners' currently used to protect it from competition from Samsung.) Patents have simply become another marketing scam.

Patents should be awarded only for major steps forward, not for incremental improvements and certainly not for the obvious or adopting a common technique in one area in a slightly different area. Isaac Newton talked about seeing further by standing on the shoulders of giants - though he actually stole that phrase :-) - patent applications should prove that they have not only climbed a shoulder but added to the baseline.

@zeddriver - I'm less pessimistic. Time has shown that once there becomes a major disparity between the income of different sections of society, revolution follows. A 'strong' government only delays the inevitable and make the revolution more bloody. China has already been there once - perhaps, this is actually part of the same episode.
19:52 July 30, 2012 by zeddriver

I hope your right. And the people do bring about change.

I base my statements on the fact that in America. We have been trying to establish relations and have made concessions to the Chinese for 40 years now. The Chinese government has made promise after promise to ease off the citizens and let them have an opinion through freedom of speech and press. Provided we in the west make some sort of concession. When we do make that concession. The Chinese government right on queue tells the west to p**s off. Then the process starts over again. The fact of the matter is. The U.N. along with the E.U. or Europe in general before the E.U. should have made it illegal to deal with the Chinese. Until THEY started making concessions to back off their people. And what do we have now? A people that are still not free. And yet we in the west continue to worship at the alter of the Chinese governments bottom. So, While industrial capacity in the west dwindles to nothing. The Chinese government is reaping the benefits and does not have the incentive to change. Because even if they don't change. Our governments in the west will stand in a queue to smooch their back sides. And America, Europe will became nations full of burger flippers and hotel chamber maids.
01:30 July 31, 2012 by Whipmanager
Comment removed by The Local for breach of our terms.
10:54 July 31, 2012 by wenddiver
Lie down with dogs, flees. People want their VWs built by Germans in Germany.
22:27 July 31, 2012 by SOS CLIENTS VW
We are 110 clients of VOLKSWAGEN grouped in a FACEBOOK page called SOS CLIENTS VW.

We are chocked to learn that FAW, the chinese partner and supplier of VOLKSWAGEN, is selling cars with counterfacted systems. We are chocked because in the same time, in China, the country where this is happening, VOLKSWAGEN offers free a waranty policy of 10 years on the automatic transmissions made by FAW, like the mq200 and mq250 (called dsg6 and 7).

How is this possible? They make abusive copies and they get the best waranties policies. This is disastrous for VOLKSWAGEN leadership and image.
00:55 August 1, 2012 by Whipmanager
I would love to know what comments I made that were in violation of thelocal policy please?
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