Is 3M 2SEXY4U?

Minnesota’s most venerable company landed one of the biggest private contracts ever awarded by the Chinese government. And promptly lost it, because of—what else?—sex and cars.

The Orient promises untold riches. And yet for centuries those riches have remained untold. From Marco Polo to AOL, Queen Victoria to General Motors, the history of foreign investment in China is undistinguished, occasionally despicable, and mostly ruinous. But that’s never stopped anyone. In the early 1980s, as China began to open its markets to foreign investment, a new generation of corporate Marco Polos decided it was time, once again, to conquer the Orient.

Minnesota’s 3M led the charge.

In 1984, 3M became the first foreign corporation granted a license to operate on the mainland without a Chinese partner. It was a significant honor, and that’s what it remained for a long time: 3M maintained an office—or presence, as they like to say—that generated almost nothing. Twenty years later, 3M China’s Shanghai manufacturing facilities and seven national service centers produce dynamic growth rates and glowing press releases. Whether they produce profits is another matter, and one not revealed in the company’s quarterly earnings statements or filings with the SEC. Nevertheless, the company insists that it is in China for the long-term, and its long experience in the country is one of its primary marketing tools. “With ten years of business savvy to date,” the company claimed as early as 1995, “3M China is as knowledgeable as any in delivering its global technology.”

In June 2002, as part of his celebrated trade mission to China, Gov. Jesse Ventura visited 3M (3M China spokesman Kelvin Li fondly recalls the governor as the “King of Wrestling”). The drop-in was typical for an official visit: drums, dragons, a brief tour, and the announcement of a large deal. In this case, Governor Ventura was pleased to declare that 3M would be providing “digital license plate technology” to China’s Ministry of Public Safety. Kenneth Yu, managing director of 3M China and the China Region, told reporters that the deal could be worth more than $100 million over several years. He also told a Minnesota Public Radio reporter that Ventura didn’t deserve much credit for the transaction: “All the deals you see that are signed in any trade mission didn’t happen just because the trade mission is over there, you know.” Yu wanted the media to know that 3M had been working on the project long before Ventura crossed the Pacific.

Kenneth Yu’s pride would be tested. Less than three months later, the Chinese government had placed the deal “on hold.” Meanwhile Yu was revising himself, bluntly telling The Rake that “It was never a deal.” Deal or not, the suspension was covered in every major Chinese newspaper (it has never been covered in Minnesota’s business press, including the Star Tribune, despite that same paper’s enthused coverage of the original announcement). Though 3M was never mentioned in those stories, it is widely known in China’s foreign-invested business community that 3M let loose blatant sexual innuendo on the streets of Beijing, thus ending the program.

In the year since the suspension, the tale of how 3M botched a $100 million deal in ten days has taken on near-mythic status in China’s foreign business community. Some recount it for laughs and others for consolation. In free-market China, failure is more rule than exception for large corporations. Even the biggest players are capable of doing something breathtakingly stupid. In spite of its extensive China experience, 3M Corporation proved it.

Over the past decade, China has become the fastest-growing automobile market in the world. In the first half of 2003 alone, passenger car sales in China increased by eighty-five percent. By the end of the year they’ll certainly exceed the record 1.2 million units sold in 2002. Predictably, the growth in private car ownership has stressed public resources. Roads are overwhelmed by traffic; cities are choked with exhaust. More prosaically, China’s local governments are running out of license plate numbers.