LEAKED: GM Sees Overcapacity Fiasco in China, Hopes Americans Will Buy Lots of Chinese-Made Buicks

“We do not comment on future product speculation,” a Buick spokesman said, refusing to confirm the leaks, but didn’t deny them either.

GM sold 919,582 Buicks in China in 2014, four times as many as it sold in the US! GM manufactures in China nearly all vehicles it sells there. About half of GM’s earnings are generated in China. After having been bailed out of bankruptcy by US taxpayers to keep the manufacturing base in the US, GM bet big on China.

In July, GM announced that it would invest an additional $5 billion in China to develop a new family of Chevrolet vehicles with its Chinese partner SAIC. All global automakers have invested billions in China, year after year, to build new plants, add capacity, and increase production. More new plants are coming. More capacity is being added. It all worked out because automakers sold these vehicles in China as fast as they could make them.

Until this year. But now supply and capacity are still rising. Demand has started to fall. Inventories are piling up. A vicious price war has broken out. And the bane of the auto industry, overcapacity, is suddenly looming ominously above them all.

Overcapacity tore up the industry in the US. It tore up the industry in the EU. It’s a deadly disease for automakers. It led to bankruptcies and bailouts. And now it’s spreading in China.

But there is a solution, apparently: exporting China-made vehicles to the US.

A few small-scale efforts have gone nowhere. America is a tough market. The best companies fight it out on a daily basis and are being taught lessons the hard way by finicky consumers.

Volvo, owned by Zhejiang Geely Holding, is starting to export its China-made S60 Inscription to the US this summer. It’s the long-wheelbase version of the Swedish-made S60 sedan. This will be the first mass-produced car from China on US streets. Not exactly a tsunami.

But now GM is reportedly jumping into the game in a big way.

On Monday, the first leak appeared, and at a very inconvenient time for GM, currently in contract negotiations with the UAW. Automotive News reported that GM is planning to sell its Chinese-built compact crossover, the Buick Envision, in the US.

“It would fit perfectly in the Buick lineup at a time when crossover sales are growing fast,” Jack Nerad, executive market analyst at Kelley Blue Book, told Automotive News. “I’m sure a lot of Buick dealers wish they had it today.”

Crossovers are hot in China, unlike cars, whose sales volumes are plunging. The Envision, built by GM’s joint venture Shanghai GM, arrived in Chinese showrooms last fall. And already, over 57,000 were sold during the first half this year. According to Buick spokesman Nick Richards, it has been “extremely well-received.”

But China would remain by far the largest market for it. Automotive News:

Both IHS and LMC Automotive forecast a U.S. launch of the Envision sometime in the second half of 2016, with annual volume forecasts from the mid-20,000s to the high 30,000s. Their forecasts for annual Envision sales in China range from 140,000 to 170,000 through 2018.

And US consumers would presumably flock to buy them:

A decade ago, the idea of China-made vehicles in U.S. showrooms might have turned off American buyers. But that’s far less likely today, IHS analyst Stephanie Brinley says. In recent years, GM and other global automakers have built modern assembly plants in China. And Americans are accustomed to their iPhones and other high-end consumer goods being made there.

“For the U.S. consumer experience, there is likely to be little difference between a Buick built at GM’s Orion Assembly plant [near Detroit] or in Shanghai,” Brinley says.

That was on Monday. On Tuesday, Reuters added fuel to the fire when it reported, based on two “sources familiar” with GM’s plans, that “most Buick vehicles sold in the United States after 2016 could be imported from China and Europe….”

According to the sources, “who did not want to be identified because their companies work with GM”:

  • Production of the compact Verano sedan will likely be shifted from Michigan to China in late 2016.
  • Production of the mid-size Regal sedan will likely be shifted from Canada to either China or Europe in 2017.
  • Buick will import the compact Cascada convertible from Europe early next year.
  • And production of the subcompact Encore crossover will be shifted from Korea to China.

In the future Buick lineup, only two models would be made in North America: the replacements for the mid-size LaCrosse sedan and the large Enclave crossover.

The automotive component industry has already centered itself in China after the Financial Crisis in a whirlwind of bankruptcies and reorganizations that led to hundreds of thousands of job losses in the US. Today, Chinese-made components are used by all automakers that sell vehicles in the US.

And Chinese-made Buicks, Chevrolets, Fords, Toyotas, and BMWs are simply the next step. With the rosy prospects of overcapacity tearing up the industry in China, exports to the US are a natural solution.

When GM jumps into it in a big way, other automakers will follow. This would be the beginning of the long-awaited and much rumored tsunami of Chinese-made cars on US streets. American consumers will get used to them. At first, they were leery of Mexican-made cars; today, they aren’t even asking anymore.

But hope for the vaunted “Manufacturing Renaissance” in the US takes another hit, this time from China’s blossoming overcapacity fiasco.

China’s auto market had been the single most important element in the convoluted recovery of GM and other global automakers. But the market has been getting battered this year. And since the yuan devaluation, the elements are coagulating into a toxic mix for GM. Read… China Mess, Yuan Devaluation Spread to the US

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  21 comments for “LEAKED: GM Sees Overcapacity Fiasco in China, Hopes Americans Will Buy Lots of Chinese-Made Buicks

  1. Spencer
    Aug 19, 2015 at 6:39 am

    They will never peel the 1997 Park Avenue from my bare knuckles. Good luck GM, I know I won’t need a bailout to keep my Buick on the road. Parts for twenty years.

    By the way Wolf, won’t the American worker laid off by GM now seeing the import domestic return for him from China, to buy with a part time job, feel stiffed?

    Cheers.

  2. Paulo
    Aug 19, 2015 at 8:42 am

    My father-in-law bought a Buick about 5-7 years ago. Some kind of sedan….it looks like an RCMP car. What a piece of crap. He wanted to give it to my 18 year old nephew and I started laughing with my wife. Not only did the kid politely refuse, he instead bought a used Honda beater with his own money made working in a lumber yard after school. That’s how bad it is. My 85 year old in-law is still driving it because he knows no one will buy it and it has absolutely no trade in value.

    My question is this: Who would buy a Chinese Buick?

    Unbelieveable desperation on GM’s part, imho.

    regards

  3. ERG
    Aug 19, 2015 at 9:15 am

    It will be a cold day in Hell when I buy anything from GM. That day just got even colder if it’s coming from China.

  4. Aug 19, 2015 at 9:30 am

    Ridiculous.

    Cars are obsolete. The industry is a dinosaur with its head cut off, too stupid to realize it is dead.

    Oil price crash is caused by bankrupt customers worldwide. The same customers are expected to buy cars … it turns out they can’t, not even in China. The reason the customers are broke is driving a car cannot pay for it, nor can it pay for the fuel, the roads, the governments, militaries, finance or anything else associated with cars. A car is a status symbol, driving a car is fun, it’s a leisure time activity. There is no economic justification for driving, there are no returns unless you own a farm tractor, bulldozer, delivery truck or taxi.

    What pays is debt and lots of it, hundreds of trillion$ of dollars worth that can never be repaid. Inability to repay = currency depreciation, dollar preference; ultimately energy deflation, where any price for fuel is too high for customers to afford.

    From 1908 and the Model T, to 2015 and Geely … a little over a hundred years … time enough for the ‘car idea’ to burn through its resource base. Good job!

    • Chief
      Aug 23, 2015 at 3:17 pm

      I would love to drive a bulldozer to work….being I though I work construction. Pretty handie in traffic too.

    • friendlyfire2@hotmail.com
      Aug 23, 2015 at 4:50 pm

      uhhh, how am I supposed to get to work? There is no bus that runs my city to where I work. Neither could I shop for groceries unless I wanted to walk 5 miles. Fairly stupid comment

  5. Vespa P200E
    Aug 19, 2015 at 9:33 am

    LOL – Government Motors to peddle Chinese made Buicks? I suppose that’s one way to smash the UAW or something.

  6. Petunia
    Aug 19, 2015 at 10:21 am

    We had a GM car. When they reposed it we were glad, never missed it, it was total crap. Who’s going to be buying all these Chinese GM cars, all the laid off workers? I can see the cars selling into the Chinese market but not here. The offshoring will be another reason not to buy a GM car.

  7. unit472
    Aug 19, 2015 at 10:49 am

    Whatever happened to the boast “What’s good for General Motors is good for America”?

    While I bought a Mazda Miata and a Mazda 6 precisely because Mazda makes ALL of its cars in Hiroshima I am not willing to extend Japanese quality to Chinese manufacturing.

    • Bob
      Aug 19, 2015 at 11:22 am

      Uhhh…the Mazda 6 was made at Ford’s Flat Rock (Michigan) assembly plant for a long time. I think it just ended due to Ford and Mazda parting ways.

  8. VegasBob
    Aug 19, 2015 at 11:57 am

    I leased a Pontiac Grand Am in 2000 for 4 years. I leased it because I was skeptical of GM quality. It turned out to be the most unreliable vehicle I’ve ever owned.

    Warranty repairs included new brakes, 2 new batteries, a new windshield washer container, a new ABS module, new rear power window motors, and a new turn signal mechanism in the steering wheel.

    I used only 36,100 of the 48,000 mile allowance (12,000 miles/year) and returned the car in immaculate condition.

    GM still sent me a bill for $96 for excess wear and tear. I’ve kept that bill all these years to remind me why I will NEVER buy any GM product EVER.

    NEVER. EVER.

  9. ERG
    Aug 19, 2015 at 12:30 pm

    At one point in my illustrious career, I had the opportunity to work with a senior VP from GM.

    Long story short: A unique combination of arrogance and incompetence.

  10. Steve in Flyover
    Aug 19, 2015 at 12:54 pm

    If Americans are dumb enough to buy Chinese Buicks after they saw GM invest billions in China after they were bailed out by the US government, they deserve the screw jobs they are getting.

    Fortunately, they don’t seem to be that dumb.

    If GM thinks that US Americans will buy chinese cars because they are used to buying Chinese-made plastic junk and Apple products, they are in for a rude awakening.

    • Vespa P200E
      Aug 19, 2015 at 1:06 pm

      Government Motors shitty design combined with Chinese penchant for dubious quality = Real piece of junk

    • Silverado
      Aug 23, 2015 at 11:31 pm

      Great point and I agree.
      Americans buying Chinese made Buicks and Buicks manufactured in Europe would be the height of hypocrisy. Maybe our so called leaders (I like to refer to them as the traitors) would drive a Buick but that’s going to be a tough sell on Main Street. As well it should be.
      “Beyond Precision” alright…

  11. MC
    Aug 19, 2015 at 1:24 pm

    And what is GM going to do about overcapacity in US, Australia and Europe? If raising interest rates on car loans in Europe are anything to go by, the party’s over yet again, and not just in China.
    That overcapacity that’s becoming so apparent in China now is nothing new: it was the same in 2008, but automakers steadily refused to reduce it. Not only that, but CEO’s and CFO’s, the same crowd that didn’t see 2008 coming and demanded (and obtained) bailouts, have been peddling for years absolutely unrealistic sales numbers and forcing their people to do cartwheels and somersaults to come anywhere near close to them (see the proliferation of so called “six-month cars” in Europe).
    Before you ask, bailouts weren’t an uniquely American thing. To name just a few, Isuzu and Mazda of Japan, PSA of France and even the almighty VAG of Germany obtained direct bailouts or had access to taxpayer-guaranteed lines of credit. More often than not this wasn’t done to avoid bankruptcy or insolvency, but to avoid downsizing, with its corollary of rolling heads. Next time it will actually be worse, because every single carmaker will expect a bailout taxpayers can hardly afford.

    To stay on topic, I am often in Zurich. This used to be expensive car heaven: until 2013 the place was literally crowded with Aston-Martin’s and McLaren’s just to name two exotic but widespread brands. I have a friend living there who told me business was so good, a German company specializing in repairing/breaking up exotica’s set up shop there to reap the spoils: hardly a week passed by whitout some local high-roller, Russian oligarch or Saudi prince crashing a Ferrari or Lamborghini. The German company had a wrecker truck on local standby 24 hours a day: they would pick up the car and send it to Germany (cheaper than Switzerland, parts can be obtained quicker, better trained mechanics etc) to evaluate damage and either repair it or break it up for spares.
    Last year exotica’s started disappearing and this year all you see are a few Porsche Panamera’s and Tesla’s. Expensive, yes, but not in the same league as what you saw before. The wind has really started turning and with the franc gaining about 20% over the euro this year alone (and now floating around parity) the bloodbath has started.

  12. Julian the Apostate
    Aug 19, 2015 at 6:10 pm

    My Dad was a GM customer all his life, while my Grandpa swore by Mopar (he loved the slant six). After 20 years of no new cars I bought a Kia in 2001, not expecting much, but was pleasantly surprised. My wife loves her 2012 Soul. The old Sephia is now my work car, and other than tires and batteries has cost me little. Brand loyalty. That really dates me. B-)

  13. Rock
    Aug 20, 2015 at 2:01 am

    Why would anyone buy a garbage American car anyway?

  14. Ned
    Aug 20, 2015 at 11:36 am

    Sure, I will buy a Chinese-made Buick when I need a new car.

    I will pay what it’s worth in labor and cheap materials:
    No more than five thousand U.S. Dollars. And that’s withe a ten year 100,000 mile warranty, like Hyundai offers.

  15. Domenic
    Aug 21, 2015 at 4:07 pm

    What about the fact that most of these cars made in most plants are all Robotic made. Robots don’t have mortgages and kids that need to go to university and don’t spend money into an economy.

    Best yet let the robots buy their cars.

    Companies who forget that! Deserver to despair.

  16. Tom
    Aug 23, 2015 at 5:31 am

    Mercedes or walk…….

Comments are closed.