G.M., Eclipsed at Home, Soars to Top in China

G.M., Eclipsed at Home, Soars to Top in China http://www.nytimes.com/2010/07/22/business/global/22auto.html?hp
SHANGHAI — A decade ago, this city had five car dealerships selling
Buicks, the top-selling General Motors brand in China. Today it has 27.
And the crowds of shoppers that fill many of them are young, ready to pay cash and not inclined to haggle over the sticker price.
As G.M. prepares a public stock offering later this year, China is emerging as a crucial piece of its appeal to potential investors — and a surprising down payment of sorts for American taxpayers, who would begin shrinking their 61 percent equity stake in the company.
In the first half of this year, G.M.’s China sales rose 48.5 percent over the same period last year, and for the first time ever, the automaker sold more vehicles in China than in the United States. Just 13 years after entering China, G.M. now says the country accounts for a quarter of its global sales — blistering growth that even G.M. did not expect this soon.
“China’s a big piece of the value of the company,” said Stephen J. Girsky, G.M.’s vice chairman for corporate strategy and business development. “And since we pull cash out of China, it helps fund investments in other parts of the company as well.”
Analysts estimate G.M. is worth $50 billion to $90 billion, with China accounting for about $15 billion of that total. The United States government converted about $43 billion of aid to G.M. into its equity stake, which is expected to be sold off over time after the company is publicly traded. A valuation above $70 billion or so would allow the government to earn a profit on its stake.
Through joint ventures with China’s S.A.I.C. Motor Corporation and other local manufacturers, G.M. is this country’s largest vehicle manufacturer, accounting for about 13 percent of the nation’s fragmented car market. Its product line aims to cover the broad spectrum of needs, like the $5,000 Wuling Sunshine, a barebones minivan wildly popular in rural areas, and the luxurious Cadillacs that can be seen in the wealthy neighborhoods of Beijing.
This week, G.M. announced plans to create a seventh brand to sell small passenger cars. In the United States, G.M. is down to just four brands, after shedding Pontiac, Saab, Saturn and Hummer during its bankruptcy.
“This is not some sort of flash-in-the-pan investment strategy,” said Michael Robinet, an analyst with the research firm IHS Automotive. “During the bankruptcy process, G.M. China was the beacon in the night that G.M. always had in its back pocket, and China will be a vital cog in G.M.’s machine going forward.”
G.M. said it earned about $400 million from its China joint ventures in the first quarter of this year, when it earned a total of $1.2 billion outside of North America and Europe. Its total corporate profit for the quarter was $865 million because of losses and other costs elsewhere.
While GM’s fast-growing China operations are helping to offset the automaker’s problems in the United States, it ultimately will need to do better on its home turf to restore its financial health. On that score, G.M. earned a first-quarter profit of $1.2 billion in North America, after losing $3.4 billion the previous quarter, but its market share in the United States so far this year is down from 2009. Analysts said G.M.’s overall prospects still hinge more than anything else on its North American operations being healthy, because that is where it can generate the most income.
The company’s success in China has been helped by the fact that Chinese consumers do not have the skepticism about G.M. that is commonly seen in the United States. In China, many shoppers know little about cars and go to a dealer for guidance.
“What we offer is accepted at face value,” said Kevin Wale, the president of G.M. China. “We don’t carry any baggage, basically. We get treated for what we deliver.”
G.M. officials say no American taxpayer money has been used to expand in China, though a Chinese government stimulus program that encouraged sales of clean vehicles and helped farmers and other rural residents buy vehicles has fueled consumer demand here.
Buick is the company’s star. Favored by China’s last emperor, Buick is perceived as sumptuous and stylish, a contrast with its staid image among many Americans. G.M. sold nearly half a million Buicks here last year, almost five times the brand’s sales in the United States.
“I was so fascinated by the shape of this car,” said Xu Tianpei, who bought a Buick Regal at the Yongda dealership in Shanghai for 230,000 renminbi ($34,000), including taxes and insurance. “
Shen Hui, the general manager at the Shanghai Yongda Buick dealership, said discounted prices were a rarity because of the psychology of the Chinese car market, which for many years evolved around scarcity.
“People will not buy if the price is discounted because they think it will fall even further later on,” he said. “But when there is no discount and tight supply, they will worry that there won’t be any cars left.”
G.M. expects to sell more than three million cars and trucks in China annually by 2015; from January to June of this year it sold 1.2 million vehicles, versus 1.08 million in the United States. G.M.s sales in China in the first half of 2010 were quadruple those of the Ford Motor Company.
G.M. has been a part of the American industrial landscape for more than a century, but it has been in China only since 1997.
Still, that was early in the development of China’s consumer market for cars and trucks, which has given G.M. an advantage over rivals that only began arriving after it became clear how quickly demand was rising.
G.M. has for years been heavily focused on investing in China and other emerging markets, and it has been introducing some vehicles, like the Buick LaCrosse and Chevrolet Cruze sedans, in China before the United States and other countries.
In addition, G.M. has greatly enlarged its engineering and design work force in China. It is building the country’s largest proving grounds and broke ground this week on a $250 million advanced technology center to research batteries and other alternative energy sources.
G.M.’s hourly work force in China has grown to 32,000 people at 10 factories, including its joint ventures, while its American operations have shrunk to 52,000 hourly employees from a peak of 468,000 in 1979.
Tim Dunne, director of global automotive operations at the research firm J. D. Power & Associates, said China’s huge population did not guarantee success for automakers but that G.M. had been done well because of its focus on meeting consumers’ tastes.
“You’re talking about one of the most competitive markets in the world,” Mr. Dunne said. “They’ve surpassed my expectations. They marshaled resources into China and made sure they did it the right way.”
Mr. Wale, the president of G.M. China, admittedly has very different concerns from his counterparts in Detroit. As the company’s sales were falling 30 percent in the United States in 2008 and 2009, they were surging 67 percent in China.
But while rapid growth is the better of the two problems to have, the consequences of any missteps in China can reverberate throughout G.M. worldwide.
“If you’re not ready and you miss the market growth, then you miss it for a long time,” Mr. Wale said.
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On 21/07/2010 10:48 PM, Jim_Higgins wrote:

The best thing governemtn could do is see if someone in China will buy GM outright. Dumpt the taxpayer sucking corporate welfare corruption on its ear.
In China, Wagoner would have been shot for running GM into the ground. Corruption does not go very far in China.
But here in North America, GM just keeps on sucking.
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Coincidentally interesting that GM has identified an employee of Chinese descent within its ranks who is alleged to have stolen GM "secrets" relating to hybrid and electric car technology. (Is this a covert attack against Chinese industry ;>) )
Some government types are claiming this to be espionage with implications of national security ROTFLMAO
There is no criminal penalty for leaking industrial secrets, IIRC. There may be lawsuits and fines however. It seems ridiculous to try to stir the pot and make this look like a federal crime rather than just what it likely is...industrial secret peddling.
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Because of patent rights industrial espionage is a federal offence, of course one would not expect you to know that.

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Patented material has to be in the public domain, otherwise, how would you know, when inventing something, whether you are infringing patent law?
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Frank doesnt know because it is NOT that way. There are patents that are held confidential because they are of a critical security nature, but unless this is the case, ALL other patents are available to the public.
You can search for them online, and read every last word. You only get into trouble if you infringe those patents, get caught doing it, get sued, and lose.
If Frank claims to be a lawyer, you had better find a smarter one.
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On 27/07/2010 12:24 PM, hls wrote:

I am sure GM does it too, or at least had done it. GM had plants in Germany WW II and bet technology went both ways.
Chinese will be disappointed at GM Volt tech, might be a shocking laugh.
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Using another's patented technology, without a license to us that technology, is a federal crime. I. E. both Toyota and Ford were licensed to use the technology that was developed for the first hybrid cars, for which both were party to its development at the time, although Toyota now owns the company that developed that technology.

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