Keith Fitz-Gerald

Is China Detroit's Lifeline?

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As deep as the U.S. auto industry's financial crisis seems to be, there may actually be a fairly simple solution.

Sell out to China.

Nearly a decade ago, I warned that Detroit's Big Three -- General Motors (GM), Ford (F) and Chrysler -- had better learn to speak Chinese if they wanted to survive.

I've repeated that warning many times since.

Now, it appears that the idea is finally entering mainstream thought. China may well be Detroit's lifeline.

From some -- chiefly those who don't understand that Detroit has largely failed to make a passing grade in an increasingly global economy -- my warnings have attracted a lot of criticism.

That's unfortunate, because by adopting such a defensive posture, these critics have missed the real point I was making: Chinese companies would initially have no interest in taking over Detroit, but over time would likely demonstrate a deep interest in acquiring key parts of the U.S. auto sector "value chain" that could support the expansionist efforts of their domestically produced brands.

Distribution channels would be very attractive. And so would auto-parts producers, since they are a key element of such post-purchase "aftercare" initiatives as maintenance and repair.

The only real question, I noted at the time, was how big the lag would be between China's acquisition of the U.S. auto-parts companies and the international expansion of its own brands.

Absent the current financial crisis, I estimated the lag would have been five to 10 years. Now, however, that lag time has dropped to as little as five years. The reason: The financial crisis has eviscerated the market values of so many Western companies, creating bargain-basement opportunities for cash-rich Chinese companies that are so alluring that they were unfathomable a decade ago.

Events are playing out just as I predicted.