GM Sucks – the Blood Out of their Chinese operations
GM pulling funds out of China – and possibly the rug out from under itself. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.
Bob Lutz, GM’s vice-chairman, said GM is making plans to move money from Chinese operations to the U.S. in order to compensate for North American losses. Since nobody seems to want to buy the Hummer brand, which GM put up for sale, repatriating profits from China is one of the few options left for GM.
Draining the huge, vibrant and growing China market of funds while the rest of the world tanks doesn’t sound like such a good idea, but these are desperate times. “We do not rule out such a possibility under current conditions,” Lutz said. (Translation: We are already preparing the transfer.)
GM had been the poster child of the Chinese market since they started producing vehicles here in 1999. Not so anymore. After a decade of falling market shares, the Volkswagen Group again is China’s market leader in passenger vehicles. GM is also being outsold by Toyota in the passenger segment. Pulling out marketing and development funds from China sound like a sure recipe for further retrenchment.
Already, General Motors Corp. Asia Pacific President Nick Reilly said the company’s vehicle sales in China fell in August and September from a year earlier. He also isn’t too sure about GM’s previous forecast of of 11% to 12% overall sales growth in the Chinese auto market for 2008. “The market is too unpredictable to forecast with any credibility,” Reilly said. (Translation: Prepare for the worst.)
The withdrawal will not sit well with GM’s joint venture partners. When cash is king and credit is an endangered species, cashing in will be extremely unpopular.
General Motors has several JVs in China through mergers of local companies jointly held with the Shanghai Automotive Industry Corp (SAIC) – one of China’s top three automakers. SAIC is also an important JV partner of Volkswagen, and if the money flows back to Detroit, SAIC may like the Germans even better. Volkswagen doesn’t need the money. Like a second coming of the Wirtschaftswunder, the VW shares defy gravity and financial malaise while the rest of the world is going to the toilet.
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