DETROIT (Reuters) – U.S.-based automakers led by Ford Motor Co have surpassed foreign brands in vehicle appeal for the first time in 13 years, according to a closely watched annual survey released on Thursday.

Helped by popular new launches, U.S. domestic brands averaged 787 points on a 1,000-point scale in the J.D.Power & Associates survey of 33 brands, 13 points higher than the average score for imported brands.

Vehicle models with high appeal scores tend to generate faster sales, higher profit margins and less need for cash incentives. High vehicle appeal also has a strong influence on customer recommendations.

In 2009, imported brands outpaced domestic brands by five points.

Luxury brands dominated the survey, led by Porsche, Jaguar, BMW, Daimler AG’s Mercedes-Benz and Land Rover.

Audi, Toyota Motor Corp’s premium Lexus nameplate, Honda Motor Co’s Acura, Ford’s Lincoln, GM’s Cadillac rounded out the top 10.

Among mass-market brands, General Motors Co’s mass-market Chevrolet brand jumped 10 places to rank 18th, driven by its Camaro sports car and Avalanche truck.

Ford, which ranked No. 1 for new car quality among mass-market brands in a separate J.D.Power study released last month, ranked 16th for appeal, same as last year, making it the No. 2 mass-market brand after Volkswagen AG.

In addition, five of Ford’s vehicles — the Expedition SUV, Explorer Sport Trac, Flex SUV, Fusion and Taurus sedans — were rated best in their segments, more than any other brand.

Audi, BMW, Chevrolet, Mercedes-Benz and Volkswagen each won two segment awards.

Hit by a series of damaging safety recalls earlier this year, Toyota Motor Corp’s flagship brand placed 32nd, second to last.

Chrysler Group LLC’s Jeep brand finished last in the study, which measures how much consumers want to own a new vehicle based on vehicle attributes such as design, interior and performance. The survey was conducted between February and May among more than 76,000 consumers.

“Domestic automakers have performed three important actions during the past two years that have led to their gains,” said David Sargent, vice president of global vehicle research at J.D.Power.

“Firstly, they have retired many models that demonstrated low appeal. They have also introduced new, highly appealing models to their lineups.”

(Reporting by Soyoung Kim; editing by Gary Hill and Andre Grenon)

Wall Street Journal

By MATTHEW DOLAN

Ford Motor Co. said it plans to make more of the components for its hybrid and electric vehicles in the U.S. as part of an effort to increase the number of low- or zero-emission models it offers over the next few years.

The $135 million move, which will add 170 assembly jobs in Michigan, is a bit of good news for a state that was hit hard by the auto industry’s deep downturn, though some of the new Ford workers may make substantially less than existing hourly employees under the terms of a 2007 United Auto Workers concession.

Ford also plans to add 50 engineers to expand its offerings of fully electric and hybrid gas-electric vehicles. By 2020, the auto maker expects that 10% to 25% of its global model lineup will be composed of such models.

Bloomberg NewsThe dash of a Ford Fusion hybrid at the Detroit car show in January. Ford plans to expand its hybrid line.

But according to some estimates, the growth in the market for fully electric cars and trucks could be slow-going. A study earlier this year by Deloitte Consulting found that the relatively high cost and limited driving range of electrified vehicles means they will make up no more than 5% of the U.S. market by 2020.

Under Ford’s new strategy, assembly of the battery packs used in hybrid and electric models will be moved to Michigan from a supplier in Mexico, while production of electric-drive transaxles will shift to another Ford plant outside Detroit from a supplier in Japan.

Ford engineers in Dearborn, Mich., will design the battery packs while engineers in Livonia, Mich., will design electric-drive transmission parts for its next-generation hybrids. Those vehicles will be based on Ford’s midsized and large sedans and will begin production in North America in 2012, the company said.

Ford is hiring more engineers in Dearborn to improve its knowledge of electrified vehicles. The advanced battery research group now has 14 members and the company expects to bolster it by six additional people by the end of the year.

For now, the batteries themselves will continue to be made abroad. Ford imports batteries from Japan for use in its Ford Escape sport-utility vehicle, which it assembles in Kansas City, Mo., and for its Ford Fusion and Mercury Milan hybrids, two sedans built in Mexico. Ford has said it plans to make the fully battery-electric version of the Ford Focus compact, due out next year, at its Wayne, Mich., assembly plant.

Ford received a $62.7 million grant from the U.S. Department of Energy for hybrid and electric vehicle engineering and production as well as tax breaks from state and local governments.

Ford’s strategy calls for five fully electric or gas-electric hybrid vehicles for the U.S. by 2012, up from its current three. The company plans to make the new vehicles under existing model names instead of creating specialized vehicles such as Toyota Motor Corp.’s Prius hybrid or the coming extended-range electric Chevrolet Volt from General Motors Co. and fully electric Leaf from Nissan Motor Co.

In 2009, sales of all Ford hybrid vehicles totaled 33,502, up 72% over 2008 and a new calendar year record for the company. In comparison, Toyota sold 139,682 Prius hybrids in the U.S. last year, though that figure was down 12% from 2008.

The hiring news at Ford comes on the heels of an announcement Friday by Chrysler Group LLC that it plans to add 1,100 workers to the 1,700 who workat its Jeep plant in Detroit. The hires will start at $14 an hour, about half of the traditional union wage.

Mark Fields, Ford’s president of the Americas, confirmed Monday the company likely will hire similarly paid workers this year. But it first must make job offers to about 450 Ford workers who have been idled, he said.

Write to Matthew Dolan at matthew.dolan@wsj.com

CLEVELAND – Ford Motor Co. said it will spend $155 million upgrading a factory to build a new fuel-efficient V6 engine for the 2011 Mustang and expects to add 60 jobs as a result.

Ford says the upgrades are part of $1.8 billion in investments for engineering and facility modernization that will support its 2011 vehicle launches. There have been a total of 1,260 jobs added by Ford as part of those changes.

Ford recently had around 600 workers on indefinite layoff nationwide.

The automaker developed nine upgraded engines and drive trains for its 2011 model Ford, Lincoln and Mercury vehicles.

The 2011 Mustang goes on sale this spring.

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By LOUIS UCHITELLE

By DANIEL LOVERING, AP Manufacturing Writer

Farm equipment maker Deere & Co. said Wednesday it will recall most of the workers it laid off from an Iowa plant earlier this year to start production of the company’s 2010 models.

Deere, based in Moline, Ill., said the 452 manufacturing employees will be recalled to its John Deere Ottumwa Works starting Nov. 30. They are expected to return to work before Deere’s annual holiday shutdown, which starts Dec. 23.

But 78 other workers will remain laid off until market conditions improve enough to warrant their return, the company said.

In June, Deere said it would temporarily lay off 494 of the factory’s workers due to weak demand amid the global economic slowdown. That followed a layoff of 40 employees in April.

The Ottumwa Works, which makes equipment such as balers and pull-type forage harvesters used by hay and livestock producers, employed about 260 salaried employees and 720 wage employees, including those who remain laid off.

Deere, the world’s largest maker of farm machinery, has faced diminished demand amid the economic downturn and lower commodity prices, which affect the buying habits of farmers. In August, the company trimmed its sales projections for 2009, saying it expects the biggest single-year sales drop in at least 50 years, but reiterated an annual profit forecast of $1.1 billion.

In response, Deere has cut costs and laid off hundreds of workers, though many have since been recalled. The Ottumwa recall will be the largest of several over the past four months. Other large machinery makers, such as Caterpillar Inc., have been forced to cut larger numbers of workers because of shrinking demand.

Shares of Deere slid $1.50, or 3.2 percent, to close at $45.42 Wednesday.

F. Brinley BrutonReporter

Photographs of President Barack Obama run on a constant loop in the foyer of a factory here, roughly 100 miles northwest of London.

Shots from the photo-op show the president standing in front of trucks with “Navistar” emblazoned on the front and side, a publicity coup for the major American commercial truck and bus manufacturer.

But why are these photos being shown in Coventry, Britain’s down-at-heel equivalent of Detroit?

The answer lies in the flat-fronted truck looming behind the president: It wasn’t made in Illinois, site of Navistar’s headquarters, or Indiana, where the photos were taken; the vehicle was made at a factory in Coventry by Modec, a small British producer of battery-powered trucks.

“It was hard to believe that the most powerful man in the world was in front of a Modec,” said Darren Dewis, one of about 85 people employed at the company’s airy, glass-ceilinged factory. “It was brilliant, we were over the moon,” the 29-year-old cab assembly worker said of the first time he and his fellow workers saw the pictures.

Dewis has reason to be pleased with Obama: Under a nearly-finalized joint venture with Navistar — an arrangement backed by U.S. stimulus funds — Dewis and his Modec colleagues will get to produce more of the kind of truck seen with the American president.

The deal shows how some of America’s $787 billion stimulus package is trickling beyond its shores, and also how some U.S. companies are having to reach out abroad for the cutting-edge technologies that the president hopes will help spark a broad recovery and foster “green” manufacturing jobs.

‘Right here in America’
On Aug. 5, Obama unveiled plans that would allow Navistar to receive $39 million in federal money to build electric battery-powered commercial trucks with Modec. The funds were part of a larger pool of money being made available to American manufacturers.

“I’m here today … to announce $2.4 billion in highly competitive grants to develop the next generation of fuel-efficient cars and trucks powered by the next generation of battery technologies, all made right here in the U.S. of A. Right here in America. Made in America,” Obama said inside Navistar’s Wakarusa, Ind., facility to a round of applause from local officials and factory workers.

Before the joint venture, Modec produced up to 15 trucks a week at its Coventry factory, and counted UPS, FedEx and Tesco, Britain’s largest retailer, among its customers. But the Navistar joint venture is the five-year-old firm’s biggest success by far.

Under the joint venture, the companies plan to build 400 battery-powered vehicles by 2010, and several thousand vehicles per year after that, Navistar said. The deal will eventually create up to 700 jobs in the U.S., the company said.

The first handful of trucks are scheduled to arrive in the United States on Dec. 25.

“A Christmas present for Navistar,” said Chris Wolfe, operations director for Modec.

An ‘ironic’ announcement?
The president unveiled his automotive grants just a few months after iconic automotive firms Chrysler and General Motors staggered toward bankruptcy and were bailed out with billions of U.S. taxpayer dollars. His promise that the grants would support products “made in America” came in Elkhart County, Ind., a community devastated by the shrinking recreational vehicle industry.

But the fact that much of the new technology would initially come from outside the country was not lost on Modec’s workers.

“If he wants to call it American and produce millions of them, let him get on with it,” quipped Stephen O’Neal, 43, who works as a team leader on Modec’s assembly line. “As long as he keeps selling them and Americans keep buying them, we’ll produce as many as you want.”

Discuss: Is this a good deal for U.S. taxpayers?

Some in the United States also noticed that the president was hyping a U.K.-made vehicle during his Wakarusa announcement.

Bright is also vying for some of the billions of dollars that the administration has decided to spend to promote electric and battery technology.

Waters was part of the team that developed General Motors’ EV1 in the 1990s, an electric car that quickly gained a small, devoted following but was eventually scrapped by the company.

“(Obama) is giving money to U.S. companies importing vehicles and not exporting them,” Waters said. “There is a contradiction there in terms of image and messaging.”

Perhaps sensitive to the perception their collaboration is creating, Modec and Navistar are circumspect about where exactly the U.S. government money is going and whether some of the $39 million will go directly into Modec’s coffers.

Navistar’s spokesman Roy Wiley also declined to say when exactly the vehicles would start being produced in the United States.

“I won’t respond to timeline questions,” he said. “We’ll start production when we start production.”

‘Investing in the future’
Matt Rogers, the Department of Energy’s senior adviser in implementing the Recovery Act program, said the Modec-Navistar deal makes good sense for Americans.

Roughly a third of the Recovery Act was meant to halt the economy’s downward spiral, said Rogers, who was a senior partner at consulting firm McKinsey & Co. before joining the Department of Energy. Another third was aimed at helping states suddenly caught short of essential cash.

The remaining third was earmarked to foster investment in technology that will have a long-term impact, both in terms of jobs and new technologies, he said.

“(The Navistar-MODEC joint venture) is going into a former recreational vehicle factory and restarting production in that factory with advanced technology,” he said. “We need to attract new technologies and accelerate the adoption of new technologies in the automotive sector,” he added.

U.S. companies certainly are getting serious government incentives to spur innovation.

Under the American Recovery and Reinvestment Act of 2009, $112 billion will be invested in so-called “green” technologies, and $2 billion will be earmarked for renewable energy research. Obama has also proposed adding $15 billion a year to renewable energy research.

One of the reasons that so many billions need to be spent to get U.S. manufacturers up-to-speed is that for the last two decades or so the country’s leading automotive companies have lagged their foreign counterparts in developing innovative and fuel-efficient vehicles.

Buoyed by decades of a lax regulations and low fuel prices, giants like General Motors, Chrysler and Ford focused on building bigger vehicles full of creature comforts, with little regard for how much fuel they used.

“Where’s the innovation been in the last 20 years? In NAV systems, putting VCRs in cars – that’s not innovation, that’s getting my decorator in to redo my living room,” said Maryanne Keller, who wrote “Rude Awakening: The Rise, Fall and Struggle for Recovery of General Motors,” and “Collision: GM, Toyota, Volkswagen and The Race to Own the 21st Century.”

“Obama has basically said, ‘You will reach 30-plus miles per gallon,’ so everyone has gotten on the bandwagon, saying, ‘We’re not going to be able to BS our way out of this like we have for the last 25 years,” Keller said.

So after having fumbled with and even stifled cleaner and more fuel-efficient technology, according to industry insiders, America’s automotive industry is looking for partners to help it come up with that same technology – and fast.

Hence President Obama’s photo-op display in an English Midlands factory.

In the case of the Modec-Navistar deal, the American company looked for a partner that had a particular product ready to go instead of having to develop one from scratch, Keller said, adding that the deal makes “perfect sense.”

‘You can’t just take’
Back in the Coventry factory, the type of collaboration Keller describes is top of mind.

“We’ve all got individual skill sets and we will all struggle individually,” said Wolfe, the operations director. “But if we can get together … we can take this technology onto the next step.”

Dewis, the factory worker, who like many of his colleagues lost his job at Peugeot and struggled to find work before coming to Modec, sees the Navistar deal in a bigger context that has little to do with salary, profits and national borders.

For him, the electric-vehicle technology he works with could well change the world for the better.

“You’ve got to think about future generations and the way the planet is at the minute,” said Dewis, who has a 2-year-old daughter and a 6-year-old stepson. “You have got to give something back; you just can’t just take.”

Wall Street Journal

“We’re just fighting to stay alive,” said Tim Knisley, PMT’s chief financial officer.

The high-profile bankruptcies of Chrysler, General Motors Corp. and a few big suppliers have overshadowed the financial peril now facing the hundreds of small subsuppliers whose fate is also tied into the auto industry.

Yet the woes at PMT are being replicated across the country. And the situation could get worse in the weeks ahead if a two-month shutdown of most GM plants goes forward as planned.

Since these smaller players don’t get financial help from the federal government, many could follow GM and Chrysler into bankruptcy court.

Kimberly Rodriguez, who heads the automotive practice at consulting firm Grant Thornton LLP, said these smaller, Tier 2 and Tier 3 suppliers are in distress. “There’s no support going their way.”

Most small suppliers have already made deep cuts in order to stay in business. But at least a dozen small suppliers have liquidated so far this year, according to Craig Fitzgerald, a partner at consulting firm Plante & Moran PLLC.

The Treasury Department’s Auto Supplier Support Program allocated $5 billion to insure the receivables of direct suppliers doing business with GM and Chrysler. But that aid has yet to have a big effect on those suppliers’ vendors, like PMT.

Mr. Knisley estimated that PMT won’t make it past the end of this month if business doesn’t pick up soon.

PMT a year ago employed 200 people, was running at nearly 90% capacity and planning on a “big growth year,” Mr. Knisley said. It spent millions of dollars on a new press and on refurbishing one of its two old ones. Now PMT is running at just 30%-40% of capacity and one press is idle. Payroll has tumbled to around 120 people.

The company last year had $40 million in revenue and projected $59 million in revenue for this year. But Mr. Knisley since has cut his 2009 sales forecast to no more than $25 million.

The most immediate problem for most small suppliers is cash.

“Everybody in our situation right now is managing for cash flow, not for profit,” said Ralph Hardt, president of the North American unit of Switzerland’s Feintool International Holding. Feintool’s U.S. employment has dropped to 260 people from a peak of around 400 in late 2007. Its Cincinnati-based operations stamp metal parts for doors, seats, engines and transmissions that go into vehicles made by GM, Honda Motor Co. and Ford Motor Co.

At Termax Corp., President Bill Smith said he is confident his company’s balance sheet is strong enough to survive until production climbs, but he is worried about some of his suppliers. One of the Lake Zurich, Ill., company’s suppliers coats fasteners that Termax makes for Ford vehicle interiors. Mr. Smith said he isn’t sure the plater, which he declined to name, will survive. If it doesn’t, he will have to go to Canada or Europe to get the plating done at higher cost.

PMT, meanwhile, is getting assistance from customers. One is the U.S. unit of Germany’s Mahle Group.

PMT ships pistons 38 miles southwest from its Surgoinsville facility to a Mahle plant in Morristown, Tenn. “They determined us to be the key strategic supplier” and shifted business to PMT, said Mr. Knisley, the finance chief.

And Mr. Knisley said Metaldyne is treating PMT as an essential supplier, giving it some priority as a bankruptcy creditor. He said Metaldyne told him that PMT could expect payment of the $844,180 Metaldyne owes in 20 days.

He hopes the company can last that long. “We’re holding on with bare knuckles.”

Write to Andrew Grossman at andrew.grossman@wsj.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Printed in The Wall Street Journal, page B2

By TOM KRISHER, AP Auto Writer

DETROIT – Hummer, the off-road vehicle that once epitomized America’s love for hulking trucks, is now in the hands of a Chinese heavy equipment maker.

General Motors Co. and Sichuan Tengzhong Heavy Industrial Machinery Corp. finally signed the much-anticipated deal to sell the brand on Friday.

Tengzhong will get an 80 percent stake in the company, while Hong Kong investor Suolang Duoji, who indirectly owns a big stake in Tengzhong through an investment company called Sichuan Huatong Investment Holding Co., will get 20 percent. The investors will also get Hummer’s nationwide dealer network.

Financial terms were not disclosed, although a person briefed on the deal said the sale price was around $150 million. The person did not want to be identified because the terms were being kept private. GM’s bankruptcy filing last summer said that the iconic brand with military roots could bring in $500 million or more.

Suolang Duoji also is the controlling shareholder and chairman of Lumena Resources Corp., a Hong Kong listed mining company.

GM and Tengzhong said in a statement that the transaction still must be approved by the U.S. and Chinese governments, although and Chinese regulators initially expressed reservations about Tengzhong’s ability to run such an enterprise.

Hummer’s current management team will stay with the new company, which will be headquartered either in Detroit or suburban Auburn Hills, Mich.

James Taylor, the GM executive who has run Hummer recently, will remain as its chief executive officer.

“We are fortunate to have a partner who understands and recognizes the importance of continuing investment in Hummer’s heritage as a U.S.-based and branded company with a view toward capitalizing on global opportunities,” Taylor said in a statement.

Hummer, whose smallest model gets 16 miles per gallon (14.7 liters per 100 kilometers) in combined city and highway driving, sold well until the middle part of this decade when fuel prices began to rise. Sales peaked at 71,524 in 2006.

But only 8,193 Hummers have been sold in the U.S. through the first nine months of the year. That’s down 64 percent from a year earlier. And only 426 Hummers were sold nationwide last month, according to Autodata Corp.

GM, which spent 40 days in bankruptcy protection during the summer and has received about $50 billion in U.S. government aid, also plans to sell its Saab brand and scrap Pontiac and Saturn as it tries to streamline its operations.

The company wants to focus on four core brands: Chevrolet, Cadillac, Buick and GMC.

With backing from a well-capitalized company, Hummer will now focus on improved efficiency and performance and include alternative fuels, more efficient gas engines, six-speed transmissions and diesel engines.

GM said its assembly plant at Shreveport, La. would continue to assemble the commercial Hummer H3 and H3T pickup trucks on a contract basis until June 2011, with a one-year option until June 2012. The military H2 version will continue to be assembled by AM General in Mishawaka, Ind. under the same terms.

South Bend, Ind.-based AM General retains ownership of the military versions of the vehicles, which have been used frequently in Afghanistan and Iraq.

The Shreveport GM plant is currently slated to close by June 2012. For the time being, the plant also is assembling the Chevrolet Colorado and GMC Canyon pickup trucks.

The plant once employed about 3,000 workers, but layoff and buyouts have reduced that number to just over 700.

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AP Business Writer Alan Sayre in New Orleans contributed to this report.

By JOE McDONALD, AP Business Writer

BEIJING – The auto-parts maker Delphi Corp. is headquartered in Troy, Mich., in the heart of the region that made the United States the car capital of the world. It’s a place where the phrase “buy American” is right at home.

Now the 3,000 employees of Delphi’s brake and suspension unit are getting a new boss. Battered by weak sales, Delphi is selling the unit to investors led by a company named Shougang Corp.

Shougang is a steel maker owned by the government of China — a government that calls itself communist but espouses a “socialist market economy” as it marches down globalization’s road toward a capitalistic future.

“Everyone’s so desperate for cash that the Chinese show up with a checkbook and people say, `Yes, please’,” says Arthur Kroeber, managing director of Dragonomics, a Beijing research firm.

Explosive growth in China and India, coupled with Japan’s clout as the world’s No. 2 economy, has long been expected to shift economic power from the United States to Asia as this century progresses. The financial crisis and resulting Great Recession are accelerating that process.

“China certainly comes out of the crisis stronger rather than weaker, and it’s the opposite for the United States,” says Stephen Roach, chairman of Morgan Stanley Asia.

Even some Americans have begun declaring this the “Chinese century” since it began nearly a decade ago. But while they and others fear the rise of China in international relations and the global economy, the reality is less dramatic: Beijing is still getting its own sprawling, chaotic house in order and is in no position to supplant the United States as global leader in the near future.

At the same time, Beijing’s power remains undefined: On an unfamiliar global stage, it is unsure what role it wants to play.

For decades, China followed the dictum of its late supreme leader, Deng Xiaoping, to keep its head down abroad and focus on development at home. But earlier this decade, emboldened by success and mindful that their globalized economy needs stability, communist leaders started pressing for a place among the nations that manage world affairs.

These days, Beijing is claiming a bigger voice in global economic forums such as the Group of 20 and is getting more deference in the United Nations, which could mean protection for friends such as Iran and Myanmar. Its military spending is the world’s second-highest, behind that of the United States.

“China is very likely to be the second-most-powerful country — if it isn’t now, then within a decade,” says Kenneth Lieberthal, director of the Brookings Institution’s John L. Thornton China Center in Washington.

For the United States, it’s a mixed blessing. The American and Chinese economies are intertwined, and the success of one depends on the health of the other.

The United States is China’s biggest trade partner. China sent $338 billion in goods here last year. Beijing is Washington’s biggest creditor, with more than $800 billion invested in government debt. American automakers look to China’s growing market to propel future sales.

The financial crisis set back U.S. growth by years and will add trillions to the federal debt over the next decade. But China avoided the worst of the crisis. Its banks are healthy and, with the help of a 4 trillion yuan ($586 billion) stimulus, this year’s economic growth is on track to top 8 percent.

Already, demand from China can affect oil prices, and it is starting to influence what products are available worldwide. Western jobs are tied to Chinese spending, from British auto factories to Australian iron mines. Chinese money is financing development of oil fields from Venezuela to Central Asia.

And China’s role as Washington’s lender-in-chief is altering the dynamic of the countries’ relationship.

At a meeting in London in April, President Barack Obama assured his Chinese counterpart, Hu Jintao, that Washington would cut its budget deficit — a promise no American leader ever had to make to a Soviet leader.

Washington’s three-year-old strategic dialogue with Beijing has long been dominated by U.S. trade grievances. But the latest round in July, overshadowed by America’s need for China to keep buying its debt, became a discussion between equals.

China, a major destination for foreign investment, was starting to reverse the flow and invest abroad before the financial crisis. The crisis accelerated that and has led to a flurry of deals. In some cases, Chinese companies have stepped in to save Western jobs — a notion unthinkable a decade ago.

In Britain, China’s Nanjing Automobile Group plans to reopen the Longbridge factory idled by the collapse of MG Rover to make limited-edition MGTF sports cars. And in Sweden, Beijing Automotive is joining a bid to buy Saab from General Motors, while Geely Automobile wants to acquire Ford’s Volvo unit.

“It’s better to be part of the race than to watch it from the stands,” says Paul Akerlund, a union representative at Saab. “We see advantages in gaining access to the Chinese market, which is the fastest-growing auto market in the world.”

In diplomacy, China is only starting to stake out positions on a wide array of global issues. It has used its influence in the United Nations to help allies such as Sri Lanka resist Western pressure on human rights. But Chinese leaders have yet to decide what overall political and military role they want abroad.

“They clearly want to be a country of some gravitas both regionally and globally,” Lieberthal says. “But there are a lot of aspects of the American approach — too ready to interfere, to tell others what to do — that the Chinese criticize as `hegemonic.’”

Even as it is on track to overtake the American economy in size as early as 2030, China is burdened by enormous problems of corruption, poverty and pollution. Measured by income per person, China ranked 130th out of 210 economies in a World Bank survey last year, behind most of Latin America and parts of Africa.

“China’s foreign currency reserves are huge. But that does not mean we are a rich country,” says Cho Tak Wong, chairman of Fuyao Group, which produces glass for Chinese and global automakers. “We are about 100 years behind the United States.”

China also has become a fast-growing market, and the financial crisis has only increased its importance to global companies. Chinese demand affects everything from global steel prices to the design of consumer goods. Cadillac created its 2008 CTS with China in mind, adding a deeper back seat for Chinese buyers driven by chauffeurs.

Other countries’ urgent need for cash has created opportunities for Beijing to make deals for resources to drive its booming economy. State companies have struck oil deals in Brazil, Venezuela, Russia and Africa and bought stakes in Australian and Canadian miners.

Delphi turned to Chinese buyers for its remaining brake and suspension operations after it sought bankruptcy court protection four years ago. The buyers are Shougang and two partners — the Beijing city government and an auto-parts maker, Tempo Group. Delphi says the $90 million sale should close in November, seven months after it was announced.

Contrast that with 2005, when Chinese oil company CNOOC Ltd. tried to acquired Unocal Corp. CNOOC offered to pay more than a rival American bidder but withdrew after critics in Washington said the sale might threaten U.S. energy security.

Still, the United States has many strengths that China lacks. The U.S. remains the world center for innovation in many areas and a magnet for smart, ambitious immigrants.

“Europeans may hope that the U.S. has been knocked down a peg or two, but even if that is so, they could be in for a nasty surprise,” says Howard Wheeldon, senior strategist at BGC Partners, a London brokerage. “Never underestimate the ability of the American people to rise to a challenge.”

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AP writers Robert Barr in London and Karl Ritter in Stockholm contributed to this report.