Dongfeng Motor Corporation Case Study

Chinese Automotive

R&D Negotiation

EWHA GSIS

Fall semester 2015

International Negotiations & Strategy

Professor Jasper Kim

Jin Lai

152SIS29

Background

Dongfeng Motor Corporation is a well-known Chinese automotive company. Founded in 1969, Dongfeng is now one of the most competitive vehicle manufacturers in China. It was the second-largest Chinese vehicle maker in 2014 in production volume, manufacturing over 3.5 million whole vehicles that year. Commercial vehicle production was higher than all other domestic manufacturers by nearly 450,000. To keep the top status in the market, this year Dongfeng started to design a new type of commercial vehicle and needed to do CFD (Computational Fluid Dynamic) Analysis, a very important step to ensure the vehicle safety performance. However, Dongfeng does not have any CFD Analysis Engineers at this moment, and also lacks analysis software such as FLUENT and ANSYS, as well as experimental facilities. Therefore, Dongfeng R&D manager started to look for cooperation partners at home and abroad and had negotiations with several automotive design companies. It took half a year before Dongfeng finally put its focus on two companies – Breton and EDAG.

Breton has had good performances in automotive R&D in the past but its recent designs are not very impressive, so the board of Dongfeng actually preferred to cooperate with EDAG. However, although EDAG has a good reputation in Europe, it never launched any projects in the Chinese market. Therefore, Dongfeng was concerned about the risk of spending a huge amount of money not achieving the expected goal. Dongfeng hoped EDAG could do the CFD analysis for free, and if it turned out well, Dongfeng would seek for a long-term partnership with EDAG.

For EDAG, it is still feeling the effects of the financial crisis and in urgent need of expanding new business in China to avoid bankruptcy. With its abundant experiences in CFD and a good reputation worldwide, EDAG is looking forward to gain profit greatly through their first Chinese project. Through this background, both sides agreed to have the first round of negotiations.

Before The Negotiation

Step One

According to Frank E. A. Sander and Jeffrey Z. Rubin, depending on relationship stages, negotiations could be divided into two kinds: Deal-Making Negotiation (DMN) and Dispute Settlement Negotiation (DSN).^[1]

“By Definition, DMN arises when parties embark upon a deal. Typically this means the parties have had no prior dealings and the focus is on their future relationship. … If a dispute arises in the course of any of the previously described deals, then the resulting negotiation is DSN.”

In this case, both Dongfeng and EDAG were looking forward to reach an agreement, so both sides defined their first ever negotiation as Deal-Making Negotiation (DMN). Meanwhile, both sides applied the GPS model to develop further negotiation proposals.