March 17th, 2009
03:02 AM GMT
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SHANGHAI, China - When Xiao Hongjun, a 38-year-old engineer, went looking to buy his first car he knew exactly what he wanted: a Buick.

GM China President Kevin Wale, left, attends the unveiling of the Volt sedan in Shanghai last year.
GM China President Kevin Wale, left, attends the unveiling of the Volt sedan in Shanghai last year.

"Because from my heart, I like American goods. Buick is a very good brand," he said shortly before paying almost $20,000 cash for a new car.

Xiao is not alone. First-time car buyers in China are driving this market. Helped by the government's cut in sales tax on smaller models and vehicle subsidies for farmers, sales surged 25 percent in February compared to the same time last year.

And the best selling brand in China: General Motors. The struggling American giant has held that position for the past four years. GM China President Kevin Wale is expecting another good year.

"The market unlike the rest of the world looks like it's going to be stable, and in fact we think it is going to grow a little bit, between 5 and 10 percent. We've been able to start the rollout of our new product introductions, and we've got a lot of momentum."

In many ways GM China is everything GM North America is not.

"GM's operations in China are flexible and efficient and profitable. And the things it does in China are applicable to its North American operations which are right now the opposite - they're inflexible, inefficient and losing money," says John Casesa, an auto industry analyst in New York.

He estimates that in a good year, GM makes around a billion dollars profit in China, and not only has that kept the company out of bankruptcy in recent years but makes a strong case to U.S. policy makers that the company is worth saving.

"Its Chinese experience underscores that this company, under the right conditions, can be very competitive, be competitive globally in markets outside North America and position itself for the best growth opportunities in places like China, India, and Brazil."

GM China operates new plants, wages are low, and there are no financial liabilities like health plans or pension schemes that are the main issues facing the operations in North America. But Wale argues there's more to the company's success than that.

"The secret to winning in any marketplace is to provide the products the customers want to buy, which is why we say we listen very closely to what the market wants, and we react very quickly to put it in place."

Analysts believe China will become the world's biggest car market within the next five years, and if the big auto makers are to survive, they'll need to be successful here, and General Motors is well placed. It just needs to ride out the great recession.

Xiao, the new car buyer, has no concerns.

"I am confident in America. I think that the financial crisis will pass quickly."

Watch my report on what's driving GM's success in China.

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Filed under: BusinessChina


soundoff (17 Responses)
  1. Dick Mahoon

    GM has finally found some people to flog their crappy cars to, the unsuspecting Chinese consumer. Not only are they selling them, they are getting those same people to build them too. It's no wonder GM is making money, they aren't paying decent wages and they aren't spending any money on R&D.

    March 17, 2009 at 5:12 am |
  2. guide

    yes,you can buy in china.

    March 17, 2009 at 8:14 am |
  3. Phil, Heidelberg, Germany

    Then go to China and take your damn Union with you and your salaries. I'll bet the chinese workers aren't drawing your fantasy salaries.

    March 17, 2009 at 8:30 am |
  4. Patricio

    I think the recovery is not so far away as it seems. Especially if we cease to hear guys like Roubini, always predicting the Argamedon. I remember he said jus after the fall of Lehman Brothers that Goldman Sachs aand Morgan Stanley were about to follow the same fate in matter of days. But, oh, suprise, the guru was wrong. Morgan Stanley suffered a terrible attack that almost wipe out the bank under false and exagerated assumptions. I even find suspicios all that. At the end, both Morgan and Golman Sachs are in pretty good shape, nothing happened.

    Now he is insisting for the nationalization of both Citi and BOFA. He propose a liquidation the year after this banks are taken over. The question is: is the guy really stupid or he has some interest here?.
    If the financial system gets stabilize without a traumatic nationalization the recovery will be in sight. Just see what happens with a group of very modest goods news en the financial sector. A very large rally and relief all over the world.

    Lest continue the actual path and not lend your ears to guys with interest in being famous or speculate against banks.

    Thanks

    March 17, 2009 at 1:58 pm |
  5. Michelle Monteiro

    They are also doing very well in Brazil where they are building a brand new plant just south of Recife near the Port of Suape. It makes their plight sound much more dramatic here in the States if you do not realize the international holdings are gaining strength.

    March 17, 2009 at 1:58 pm |
  6. ron bodnar

    i wonder what the true figures for unemployment are,but wait a minute,are gov. won't lie!!!!

    March 17, 2009 at 2:38 pm |
  7. James Smith João Pessoa, Brazil

    GM seems to be doing very well here in Brazil, too. But the model line they offer here is very different than in the USA. I suspect that many of these smaller, fuel-efficient designs would do well in North America, too.

    The flex-fuel cars built here should have a good application elsewhere, too. A large part of GM's troubles in the USA is that they have been trying to sell the wrong cars. Management always seems to provide for the market in the past, not in the future. They have to look beyond this quarter's profits.

    March 17, 2009 at 2:47 pm |
  8. Elke, Germany

    It looks like in Germany, without the bonus from our government for old cars, older than 8 years, they wouldn´t have sold so many cars here. And a bonus of 2500€ is much money. In the end, the new cars are more environmental friendly and need less fuel. Most peopls bought smaller cars. I´m sure, without this bonus it wouldn´t be like that.
    The same in China. Without the boost from the Chinese government, the people would´t buy so many cars.
    The question is: What will be, when the governments stop these supporting measures?
    To be honest, I hope, the economy will recover. The quicker the better.
    Best wishes
    Elke

    March 17, 2009 at 9:02 pm |
  9. Franky

    Well, what a surprise...

    This is good news, no? Trust me, we may not like them here but overall, is good baby, is good guys. GM doing good in China, huh? I gotta say, so we do have stock here in the states...awesome!!

    Now let's sit back and wait for the countries to bow down to us...

    March 17, 2009 at 10:51 pm |
  10. Paul Moreno

    You need to look deeper into this – the reason GM is thriving in China is that it offers a wide range of smaller, built-for-European/Asian-market cars. Some of the cars under the GM banner in China will never see the light of day in the USA! (Wuling, the makers of the ultra-minivans derived from the Daihatsu/Suzuki small vans in Japan, are what you see putting around the second and third-tier cities in China, may not meet US road standards, and barely make the safety mark elsewhere in Asia for that matter!)

    Secondly, you need to look at what GM offers in the US markets and in the China market. They are grossly uneconomical in terms of fuel consumption, take up way too much space, and if you look at the Buick Models in China that are selling well, its the mid-sized vans (Buick Firstline – which is the US minivan, with modifications over the last 10 years but essentially the same van since it's introduction and manufacture in China.) The other model was the Buick Regal (Which was the first GM luxury car built in their Shanghai Factories back in the mid 1990's. The Regal didn't do so well in the US if I remember correctly.

    The other models are produced and designed (probably) in conjunction with their European and Asian bureaus – models like the Buick Exelle (Known also as a Chevrolet Lacetti in Europe) and and the Buick Sail (Which has its roots from the Opel Corsa 1.4), these things tell you that, although they like the GM brands, it isn't necessarily the American car that they want! The Chevrolet Spark (ultra compact car) suspiciously has its roots from the Daewoo Matiz!

    Competition is rife like never before, with all major automakers now battling for market share in China. But one needs to understand the subtle differences of what makes GM successful in China, and unfortunately, it isn't the American designed or made models that is winning the game for them, its everyone else in the GM network outside of the US.

    This poses a very serious question on what direction now will the US take in reviving their domestic automobile business, given environmental factors, cost-efficiency and manufacturing burden is taken into account.

    March 18, 2009 at 3:59 am |
  11. nabil m julkif

    well i guess this shows that chinese r much better businessman and optimistic people then the americans

    March 18, 2009 at 4:39 am |
  12. Jim Rousch

    You mean that the Chinese have more admiration for GM than Americans?

    That says a lot about how un-American the GOP is.

    March 20, 2009 at 10:16 pm |
  13. Jim Rousch

    This shows just how un-American the Republican Party is.

    If you don't support the American auto industy, you're un-American.

    March 20, 2009 at 10:17 pm |
  14. JT

    Very informative post Paul Moreno. But I think the differences between the two case studies are hardly subtle.

    The China case study is proof in the pudding that issues: unions, wages, health care, retirement and product offerings are what's killing GM in the US. The conditions in China are perfect for maximum margins while to say that's not the case in US is an understatement. It's why most US manufacturing jobs of many industries are lost to China. Hardly surprising that GM discovered why for themselves.

    March 22, 2009 at 4:59 pm |
  15. Drgunzet

    The logic is so obvious. The better cars are Japanese made ones. But the Chineses don't like the Japaneses (refer to the rape of Nanking). So, they prefer the American cars. As long as the American cars are not too bad, they will buy the lesser valued cars over the Japanese made ones.

    March 22, 2009 at 7:57 pm |
  16. Rod

    The appearance of this, is that GM and others (banks, investment houses) have found a way to pit global workers against themselves. Loss of jobs in the US (excuse: wages too high, health care, etc.), means job gains somewhere else, for workers that work for compensation that is sub-standard at best. Global companies are only loyal to themselves (CEOs...) Global companies' treachery and thievery transcends all borders and so do their lies.

    March 31, 2009 at 9:27 am |
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    September 21, 2012 at 8:40 pm |

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