GM and China: What Are They Thinking?

Industrial production in China wasn’t up to snuff in April but GM has some plans to help boost the numbers.

The government released statistics today (treat all government statistics from China with some skepticism) that showed factory output rising 7.3% from last April, but that was less than the 8.3% growth recorded in March. Combined with the trade statistics, that showed a drop in exports of 22.6% in April and you have a country that’s growing much more slowly than in the past.

More to the point, the growth is probably due in great measure to the stimulus program of the government. This program is heavily oriented towards infrastructure. While these expenditures are going to represent a net long term positive for the economy, they are by nature temporary boosts to the economy.

China has to see demand from the West pick up in order to have any genuine economic recovery and that looks like it might be a long time in coming. Stimulating domestic demand is on their to-do list but that’s a long-term project. Think decades. Though they have growth, relatively speaking, China is no better off than its trading partners at this point in time. Their problem is that if the trading partners get better but don’t recover back to their old form then China could be in a world of hurt.

Meanwhile, GM, in an apparent move to help their Chinese friends, announced today that they would begin importing cars manufactured in China to the U.S. The stated purpose is to save on manufacturing costs. They plan to import about 17,000 in 2011 and think it will top out at around 53,000 in 2013.

It might not surprise you to learn that the UAW does not look favorably on this turn of events. You might also be sitting there and thinking about the same thing as I am. Specifically, the guys running this company must be dumber than a bag of hammers to announce something like this while they’re in the middle of trying to get the union to take haircuts and convince a Congress and administration that’s grandstanding about saving jobs to pony big bucks to keep them alive. Then again, they probably wouldn’t be in this position if they had brains to begin with.

If the government ends up owning 55% of GM does that mean that C-Span will be able to broadcast the monthly board meetings? If they do, I won’t miss an episode.

Comments

[Dctrofspin:]

You obviously have a poor understanding of the process with WTO. These disclsures are required...it wasn't a PR play. The issue is not "helping China friends." It's that Buick can not expect to sell more than 20,000 Regals in the US....a total that would not support an investment in plants and parts sourcing in the US. They'll be pumping out hundreds of thousands of these out in China...pulling several thousand for sale in the US will help better establish Buick, provide net income for the global operations, thus helping stabalize US jobs...not lose them. Welcome to the global economy.

May 14 03:43 AM

[Dctrofspin:]

I meant to say the process with USTO....not WTO...sorry.


On May 14 03:43 AM Dctrofspin wrote:

> You obviously have a poor understanding of the process with WTO.
> These disclsures are required...it wasn't a PR play. The issue is
> not "helping China friends." It's that Buick can not expect to sell
> more than 20,000 Regals in the US....a total that would not support
> an investment in plants and parts sourcing in the US. They'll be
> pumping out hundreds of thousands of these out in China...pulling
> several thousand for sale in the US will help better establish Buick,
> provide net income for the global operations, thus helping stabalize
> US jobs...not lose them. Welcome to the global economy.

May 14 03:46 AM

[User 387439:]

I agree with the above poster. Importing less than 20,000 units from China isn't a move to produce and import mass quantities of any consequence. It is part of the global scheme of things consisting of quotas for everything from CAFE, parts agreements, brand recognition, etc. Think global. The auto industry has become so complex and manufacturers so entwined the layman or average economic analyst can not accurately assess the reasons for specific trade actions.

May 14 08:40 AM

[Tony C:]

Nice try, Dctrofspin. Only problem is it's not Buicks that GM will be importing from China. They announced it would be the new small cars (Chevy Spark) that they promised congress they would start selling in the US.
Of course they never promised where they would be made. Let's give them more money!


On May 14 03:43 AM Dctrofspin wrote:

> You obviously have a poor understanding of the process with WTO.
> These disclsures are required...it wasn't a PR play. The issue is
> not "helping China friends." It's that Buick can not expect to sell
> more than 20,000 Regals in the US....a total that would not support
> an investment in plants and parts sourcing in the US. They'll be
> pumping out hundreds of thousands of these out in China...pulling
> several thousand for sale in the US will help better establish Buick,
> provide net income for the global operations, thus helping stabalize
> US jobs...not lose them. Welcome to the global economy.

May 14 08:54 AM

[Speedzzter:]

Wedging open the floodgates to the future dumping of Chinese cars in the U.S.A. may make short-tem sense to GM's green-eye-shade gang (who are desperately trying to figure some way a mess like "Government Motors" can earn a profit while complying with 35-40+ m.p.g. Corporate Average Fuel Economy Standards, EPA, OSHA, greedy unions, trial lawyer pirates, platinum health care plans and other costs of building consumer products in overregulated, overtaxed 21st Century America)

However, from a strictly political standpoint, it's outrageously tone-deaf.

Moreover, while it's somewhat speculative that Americans will immediately rush in to buy Communist Chinese-made "Buicks" and "Chevrolets." It does, however, lay the foundations for Chinese domination of the U.S. light vehicle market in 15-20 years, as GM teaches the CHI-COMS all about U.S. regulatory compliance and breaks down nationalist/political resistance to Chinese vehicles. A collaborator makes that process much easier. Once that happens, the Chinese will take advantage of the grossly undervalued yuan (based on purchasing power parity analysis) and virtual slave labor to blow everyone else out of the low and low-middle ends of the market.

What was it that Vladmir Ilyich Lenin said? . . . "The Capitalists will sell us the rope with which we will hang them." Apparently GM and the Democratic Obama Administration want to be in the "rope selling" business. While U.A.W. complaining may extract a few concessions and some featherbedding, don’t look for anyone in the federal government to nip this threat in the bud. We’re simply too dependant upon CHI-COM purchases of U.S. debt and too beholden to multi- nationalist ideology.

Besides, if GM doesn’t do it, somebody else most assuredly will.

May 14 10:14 AM

[TomWilkinso...:]

I suggest people interested in this issue check out today's AP story by Tom Krisher. It adds some much needed perspective.

GM will continue to build about 65% of the vehicles it sells in the U.S. in the U.S., and more than 90% of the vehicles it sells in the U.S. in North America. We will continue look outside NA for small volumes of vehicle for niche segments, like we do today. (G3, G8, Astra).

May 14 10:15 AM

[Sad for now:]

Wedging open the floodgates to the future dumping of Chinese cars in the U.S.A. may make short-tem sense to GM's green-eye-shade gang (who are desperately trying to figure some way a mess like "Government Motors" can earn a profit while complying with 35-40+ m.p.g. Corporate Average Fuel Economy Standards, EPA, OSHA, greedy unions, trial lawyer pirates, platinum health care plans and other costs of building consumer products in overregulated, overtaxed 21st Century America)

Speedzzter,
Nice work! Your statement says a lot about why this country's economy is being strangled by our Socialist-Marxist Presidential/Congressi... cabal. We are heading for a dissolution of our basic freedoms if the American people do not change it.

May 14 10:49 AM

[trader123:]

Dose anyone know if there a possible extension to the June 1st deadline for GM ?

May 14 01:54 PM

[trader123:]

Dose anyone know if there an extension the June 1st deadline for GM ?

May 14 01:57 PM

[SouthernCEO:]

This is the "Change" I was afraid of.

May 14 03:19 PM

[FDNY RET:]

Sounds good to me Govt. Motors gets cheap labor on cars it was going to sell in China anyway-(Buick's)-plus a few to bring home and stick it to the UAW.

China get's employment for many in the middle of a world wide depression, plus an American sales/service network for a bunch of little rice ball burners it want's to sell us, plus a foot in the door with the Bama Govt. to get the little death traps approved.

May 16 02:18 PM