Legal battle stalls firm’s bid to sell Chinese cars in U.S.

Times Staff Writer

In the race to bring Chinese vehicles to the North American market, Chamco Automotive has hit some major-league potholes.

Just last year, Chamco (that’s short for China America Cooperative Automotive Inc.) seemed to be riding high in its quest to have two Chinese-made products in U.S. showrooms this year: a compact pickup and a mid-size SUV.

It had lined up a supplier in China and rounded up millions in capital from investors. Legendary Orange County car designer Steve Saleen had signed on to oversee the engineering changes required to meet U.S. safety and emissions rules. Plans were announced for an assembly plant in Tijuana.


As recently as January, Chamco Chairman Bill Pollack was making the rounds at the Detroit auto show, touting his company’s products.

These days, though, Chamco’s future is very much in limbo, with two competing factions claiming to control the company. It’s not even clear whether Pollack is still in charge.

The legal wrangling isn’t helping the company’s image -- either with car buyers or prospective dealers.

“Who’s going to want to put up hundreds of thousands of dollars for a dealership if they don’t know who has legal claim to the company?” said Aaron Bragman, an analyst with consulting firm Global Insight.

Several companies are scrambling to sell the first cars in America stamped “Made in China.” Chamco said it planned to get a jump on rivals by importing pickups and SUVs built by Hebei Zhongxing Automobile Manufacturing Co. -- ZX Auto China for short -- a relatively small manufacturer that sold only 37,000 vehicles last year, Bragman said.

After two years of news releases but little in the way of concrete results, things started to unravel at Chamco on March 3. A group of dissident shareholders attempted what amounted to a palace coup, saying it was taking control of the company from Pollack and his faction.

The dissident group -- led by former executives from Fiat and Audi -- set up camp in Bridgewater, N.J. Pollack remained ensconced in Chamco’s original headquarters 25 miles away in Parsippany.

The dissidents set up a rival website and urged customers, investors and prospective dealers to sit tight while they sorted things out. A plan for the company’s future will be issued in May or June, they said.

The group also sued Pollack and some of his associates, accusing them of fraud, diversion of funds, fabrication of records and mismanagement. Thomason Auto Group of San Francisco also sued Chamco, alleging fraud and deception. The chain of auto dealerships had ponied up $6 million to be Chamco’s West Coast distributor and said the money was being misspent.

Pollack’s group filed a lawsuit of its own against the upstart management team. In a letter sent to dealers this week, Pollack said his group was the “true” Chamco, denied that any money had been misspent and said the dissident “conspirators are not legally entitled or qualified to represent Chamco Auto in any way.”

Pollack also said he had an exclusive distribution agreement with ZX Auto China.

The strangeness of the situation isn’t lost on at least one of the participants.

“We have a legal situation where the person who is no longer in charge says he is still in charge,” said Alex Catton, a spokesman for the dissidents. “It’s a bit hilarious, I’ll admit that to you.”

Meanwhile, Steve Saleen, who made his name selling supercars hand-built at a factory in Irvine, said he has thrown in with the dissident faction and remains committed to helping the group fulfill its goal of importing ZX vehicles to North America -- first to Mexico and then to the U.S. He is currently testing several copies of both ZX models in Orange County.

Saleen said he had been to China recently to meet with Hebei Zhongxing executives and said the upstart Chamco management had a “letter of support” from the automaker, but no formal distribution agreement.

Saleen said his commitment to Chamco wasn’t affected by the recent announcement that he planned to produce a line of ultra-high-performance vehicles through a new company called SMS. Saleen, who quit his namesake company in Irvine a year ago, also has formed a new racing team and is once again tearing up test laps.

Whichever Chamco ultimately prevails -- Bridgewater or Parsippany -- the company faces the challenge of entering the market with two vehicle types that increasingly are hard sells in these times of high gas prices.

“There is no doubt that eventually, Chinese vehicles will make it to American shores,” Bragman wrote in a research note this year. “It is highly unlikely that it will be Chamco in 2009, however.”