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General Motors' China Offense

In spite of what you see in the news about General Motors' August sales being down 20 percent even with the Cash for Clunkers program, GM is poised to make a serious profit by setting itself up as a major automotive supplier for the Chinese market. The potential of that market is nothing short of impressive. I addressed this in my latest AIP column:

In spite of the Cash for Clunkers program, General Motors' August sales still dropped 20 percent from August of last year. Obviously, no Cash for Clunkers program will solve the problems the company has with its American operations nor will it lift the company out of its North American sales slump. But there is a market in which GM is performing exceptionally well: China. While GM's sales here in America have dropped dramatically, its sales in China have skyrocketed to new heights. GM's Chinese July sales soared 78 percent, driven by its demand for Chinese-produced Buicks, a favorite among China's upper-middle class, and Wuling micro-vans, both products of the Shanghai Automotive Industry Corp-GM-Wuling joint venture. SAIC-GM-Wuling has also announced it is planning to export commercial versions of its micro-van, the Wuling N200, under the Chevrolet brand to South America, Middle East, and North Africa, expanding its global presence even further.

Bolstered by its growing China sales, GM has invested $293 million in another joint venture, this time with China's FAW Group Corp. This new joint venture gives GM a 50 percent stake in the new company and will focus on producing FAW-branded light-duty trucks and vans for the Chinese consumer market. Production will take place in two plants already in existence with a third to be built later. It is because of GM's issues with its American market that the Chinese market is a perfect business fit. It can allow the company to make a profit once again, re-invent itself, and make it a significant player, not just in China's expanding markets, but also in the Asian/North African market.

China's expanding middle class is responsible for GM's impressive China sales numbers. In 2005, the country's middle class was comprised of 60 million people. It has already reached 80 million this year alone. China's economy is growing so large and so quickly that by 2020 the middle class is expected to explode to 700 million people, more than twice the size of America's entire population. Imagine a market of 700 million people with growing salaries and money to spend. This is a market other automotive manufacturers can only covet. That GM has positioned itself so effectively is nothing short of a life line that could allow it to relive its glory days, but this time as a real global competitor.

So why do the American taxpayers still own GM? It shouldn't. With the plans GM has made in China in response to its massive up and coming middle class, combined with an intelligent operational draw down here in the US to meet the market's realistic demands, GM will be more than capable of standing on its own. Then the company can pay back (with interest!) the billions of US taxpayer dollars that Barack Obama infused into it.

GM's Buick is a favorite among the Chinese upper middle class, which is what saved the brand from elimination. If GM were really smart it would take advantage of China's interest in the Buick and combine it with its growing interest in golf and move the Buick Open to one of the many beautiful golf courses over there. It could then pay Tiger Wood and YE Yang handsomely to play a kind of PGA Championship rematch in its first tournament. This would be one heck of a marketing coup. Not only would this encourage brand loyalty for GM in the Chinese market, but it would also allow the Chinese government to introduce its country's golf courses to new tourism markets outside of Asia.

While you're at AIP be sure to stop by and read the other columns and blog posts. Ed Morrissey has a very interesting piece on retail health care and finds, unsurprisingly, that it offers better service for less money than public health care. Rick Moran discusses the health care dilemma that everyone knows we have but no one wants to talk about: Medicare reform. Melissa Clouthier writes that the new "in" thing is being a political independent but finds that most of these new independents are nothing more than contrarians. Jim Hoft advises that we be wary of the bogus studies that undermine America's health care system.


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Comments (12)

Good for them and I agree, ... (Below threshold)
JustRuss:

Good for them and I agree, if they have the capitol to pay back the government then let us get the F*** out of Detroit. The US should never have invaded the Auto Industry anyway and I blame Bush for opening the door before Obama blew the door off its hinges.

Only problem with the China... (Below threshold)
Lisa:

Only problem with the China theory is that there isn't a growing middle class. Their "consumers" are in as much trouble as the US middle class. The whole "China will lead global economy" thesis is totally bogus. Totally!! GM is simply making the same damn mistakes that have led them to bankruptcy to begin with. They are a broken company because of a broken business model. One more time everyone: China is NOT a capitalistic, economic powerhouse that will save the world. I heard one idiot analyst use this reasoning for why China will lead: "They have a lot of people." Yeah, that's it, lot's of people...natural resource...blah, blah, blah.

Only problem I see is if Na... (Below threshold)
GarandFan:

Only problem I see is if Nancy and Harry suddenly realize the money coming in from GM. Why sell 'a money maker' that can fund other dreams on the Dem wish list.

Wow. I had to look twice --... (Below threshold)
Hamish:

Wow. I had to look twice -- this could have been written by Paul Hooson.

My apologies, Kim... but it's true.

Really, Hamish? Saying that... (Below threshold)

Really, Hamish? Saying that GM should be required to stand on it own two feet, free from US taxpayer handouts, because it's finding a new market for its products overseas is a liberal position?

No offense, Kim, but Hooson... (Below threshold)
Hamish:

No offense, Kim, but Hooson could have written this:

GM's Buick is a favorite among the Chinese upper middle class, which is what saved the brand from elimination. If GM were really smart it would take advantage of China's interest in the Buick and combine it with its growing interest in golf and move the Buick Open to one of the many beautiful golf courses over there. It could then pay Tiger Wood and YE Yang handsomely to play a kind of PGA Championship rematch in its first tournament. This would be one heck of a marketing coup. Not only would this encourage brand loyalty for GM in the Chinese market, but it would also allow the Chinese government to introduce its country's golf courses to new tourism markets outside of Asia.

Of course, a reference to scooters would have been just the frosting on the cake...

Sorry, Hamish, but I don't ... (Below threshold)

Sorry, Hamish, but I don't see your concern. What I wrote is true. It would be smart for GM to move the Buick Open to China to take advantage of the Chinese market. The tournament will probably not be played here in the US anymore anyway since Buick won't be sold here. Is it that I am saying GM is making a move toward exploiting the Chinese market that has you so upset? It is true that China's middle class is exploding. Buick is a favorite brand among the Chinese upper-middle class. I linked to my source, the Detroit Free Press, at the AIP column.

The reality is GM can't make it here in America in it current form, so it should have been left on its own to either declare bankruptcy and restructure or close its doors. This is America. We are, or should be, a country based on free market principles.

Unfortunately, GM was made a ward of the US government and the American people are not happy with it, hence GM's lousy sales numbers in C4C. Now, if it can make money in another country, fine it should do just that and stop taking US taxpayer money.

How is that a liberal argument?

Lisa - "Only problem wi... (Below threshold)
Marc:

Lisa - "Only problem with the China theory is that there isn't a growing middle class. Their "consumers" are in as much trouble as the US middle class."

Funny you didn't offer proof via a linked article, what's the matter, afraid to admit you pulled that crap from idiots like Krugman or the loonbats at MSNBC?

China: Implications of an Emerging Middle Class

Rise of China's Middle Class.

China's Middle Class.

Kim, that wasn't a criticis... (Below threshold)
Hamish:

Kim, that wasn't a criticism, just a bit of gentle teasing. Seriously, I meant no offense.

One of Hooson's trademarks was his effusive praise of China, after all...

I wasn't praising China. I ... (Below threshold)

I wasn't praising China. I was simply acknowledging a reality and that noting that GM's taking advantage of that reality is the answer to getting it off of the public dole. GM is doing what it is supposed to be doing as a company: increasing sales and market share. It's too bad that the unions and government regulations here in America have sent America's manufacturing base fleeing to countries like China, Honduras, Vietnam, etc. It used to be the greatest in the world. What a shame.

It's too bad that the un... (Below threshold)
JLawson:

It's too bad that the unions and government regulations here in America have sent America's manufacturing base fleeing to countries like China, Honduras, Vietnam, etc. It used to be the greatest in the world. What a shame.

Yeah, but the benefits were sweet while they lasted for the unions. My father-in-law used to work at a steel mill in PA (closed over two decades now) and the benefits got bumped up year after year. One year, they got a 'one time good deal' month's 'sabattical' w/pay. Two years later - they got another, with bonuses. Two years after that the plant shut down for good.

The union officials got moved elsewhere. The workers? Well... that area got hit hard. My mother-in-law still thinks the unions encouraged the rank and file to get 'too damn greedy for our own good'.

The CASH FOR CLUNKERS is a ... (Below threshold)
Flu-Bird:

The CASH FOR CLUNKERS is a big time crock its just another one of those rediculous ideas from liberal idiots




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