Big Risks, Thin Profits. US taxpayers helped.
In China, General Motors is hot. In November, its 10 joint ventures and two wholly-owned foreign enterprises sold 418,225 new vehicles in China, up 13% from a year ago. It was the best November ever, GM said. SUV sales soared 73%.
By comparison, in the US, GM sold 245,387 new vehicles in November, it reported a few days ago, down nearly 3% from a year ago. In other words, in November, GM sold 70% more vehicles in China than in the US.
China became the world’s largest new vehicle market for the first time in 2009, when sales in the US plunged. For years, growth rates in the Chinese market blew the doors off the US market. But the hectic pace has recently subsided. For 2017, deliveries are expected to rise only 2%, and competition from local automakers is getting tougher.
Buick is still hot in China – though it’s just about moribund in the US, where deliveries fell 3.5% year-over-year in November to just 16,833 vehicles, accounting for only 7% of GM’s total sales in the US. Of them, 2,228 were the China-made compact SUVs, the Buick Envision.
In China, Buick is still the fourth largest auto brand with a market share of just under 5% so far this year, behind Volkswagen, Honda, and Toyota. In November, GM sold 112,738 Buicks, or 27% of its total sales. But for the month, Buick was already outsold by GM’s Baojun.
Baojun is the hottest brand GM has in China. Sales of the bargain-priced vehicles soared 52% in November to 113,711 units, accounting for over a quarter of GM’s total sales in China.
GM launched Baojun in 2010, after the “New GM” had emerged from Chapter 11 bankruptcy in the US in July 2009, with Debtor in Possession (DIP) financing and equity investments from the US taxpayer. This support helped GM go on an investment spree in China, and, along with its joint-venture partner SAIC, plow $2.4 billion in the Baojun factory in Liuzhou, even as many former GM plants in the US had been shuttered and were disposed of in bankruptcy.
But GM owns only 44% of Baojun. With technology transfer to SAIC being a big part of the deal, this is a risky proposition. The Wall Street Journal:
Other foreign auto makers “are consistently taken aback by GM’s apparently generous technology sharing” when it comes to Baojun, said Michael Dunne, a former GM executive and now president of Dunne Automotive, a consultancy. “The open approach has engendered considerable goodwill but it also leaves GM vulnerable to the whims of its powerful Chinese partner.”
GM was less proud of its brand Wuling. It sold 113,919 units. GM does not brag about the year-over-year change in deliveries, as it does with Baojun. In fact, in the press release, there is no mention of this year-over-year change. Turns out, a year ago, GM had reported 121,566 sales in November. In other words, Wuling sales dropped 6.3% year-over-year.
Nevertheless GM gushed, while purposefully leaving out Wuling: “GM’s performance was strong across its brands. Baojun deliveries reached an all-time monthly high, while Buick, Cadillac and Chevrolet set November sales records.”
China-sold Buicks, Cadillacs, and Chevrolets are built by a 50-50 GM-SAIC joint venture. These vehicles tend to be more upscale than GM’s Chinese brands.
For the first 11 months this year, GM sold 32% more vehicles in China than in the US, with 3,549,087 units in China, up 3.3% year-over-year, versus 2,691,493 units in the US, down 1.2%, according to Autodata. 2017 will be the sixth year in a row when GM’s vehicle sales in China exceeded those in the US.
But it’s complicated. These are joint ventures, margins in China are thin, and in terms of profits, GM’s China operations don’t contribute all that much. For the year 2016, GM booked global profits of $9.4 billion, of which GM attributed only $2 billion to “equity income” at its joint ventures in China despite all the massive in vestments in China. Most of the remainder of its global profits came from its sales in the US, and mostly from the fat profit margins on pickups and SUVs.
Then there’s Tesla, with a market capitalization not much behind GM’s despite minuscule vehicle sales. This is where hype goes to die. Read… Carmageddon for Tesla
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Do you suppose that GM could afford to sell cars in America below cost to keep up their global market share? Would GM effectively dump cars at a loss in our market, to maintain market share? and then repatriot their profits through the corporate tax cut? What would Trump say about that?
No, predatory pricing is an economic myth. Doesn’t work in practice. DuPont had an excellent example of this back in the day. Tax credits are really just lower taxes. Nothing wrong with that. It’s not the governments money they are receiving, it’s their own productivity. That being said American politics and corporate structures are siblings that sleep together. The only thing they can produce is an inbred child
GM with Chinese quality is doomed. Just when I thought they couldn’t get any worse.
The hinese assembled product is actually better than the US assembled product on the ground here.
However GM for decades has done everything it canto hold back the development t of alternative vehicles and energy.
It was a driving force in the assassination of the “Tucker”.
It has no national loyalty it stripped the US of Billions in the Bail-out them moved wholesale to china.
GM is a Globalised Vampire Corporate. Its only loyalty is to its profits.
As such. I will never buy its products EVER again and will always advocate against it.
As the Globalised Vampire Corporates, are the biggest threat Humanity and this planet, has ever faced.
Independence day is a b grade comedy move, The Aliens in it, are what GM and its Ilk are. As yet the are still based solely on this planet.
Because my ’87 S10 Blazer was such a great car ….
Essentially they are giving everything away for free and not even making much money in the process, all funded by the generous US tax payers while destroying US manufacturing at the same time.
You just cant make this up. They might as well re-incorporate in China and be done with it.
Well, there I went and thought that GM was building Chevys, Buicks, and Caddys in the US and exporting them to China. It didn’t occur to me that they would just export the jobs instead of the cars. Not to mention 100 years of technological know-how.
If only we had a President who would fix this. Someone who would put America first and make America great again. But alas…
but US are exporting soon worthless paper USD and getting full produced products…..better it cannot get. It takes many hours to produce a car in germany but 1 second to produce USD
I will have you know that my Chinese brethren provide excellent quality product. Just look at all the steel used in the bay bridge construction, nothing but the finest quality you can get. Satisfaction guaranteed or we’ll get you new steel.
* Please note I didn’t say it would be free.
* Also please note that I didn’t say 100% of the steel for the bay bridge construction was of the finest quality.
* Also please note that I didn’t indicate whose satisfaction.
* Did I mention that CALTRAN would have to pony up for shipping costs?
And the steel bolts that already cracked — though they were supposed to hold the bridge together during an earthquake — were made in Ohio. The problems with that bridge are spread around pretty far. But it is a beautiful bridge :-]
At least they can repair it quickly. Did you call that bridge beautiful? Ugg
I like it. I see it from our windows. The new made-in-China tower with the cables draping off, all lit up at night, is pretty. But OK, that’s just my taste.
Also, you have a beautiful view driving in both directions. On the old bridge, you only got the view on the upper deck when going west.
GM Sags in US:
Hint to all … this is the best time to buy a new GM. I bought a new Subaru a couple of years ago when the dollar / yen ratio was favorable to buyers in the US. I saved a lot. The price I paid is not available today. GM is subordinate to buyers today. I paid 30% off list for a new GM car a couple of weeks ago. Only suckers buy when GM is bragging about how well it is doing.
The quality of GM is so bad even at 30% off you most likely overpaid.
maybe in 1980’s. The Vega was a pos. Not today. Not even close. Fake belief. Amazing fine car.
We had a GM car, pos.
IMO, a GM vehicle offers better passenger safety design features than most other manufacturers, including specifically, Toyota. Ford has really focused on this as well, since the days of the Pinto. At least until recently, the Crown Victoria sported a full frame.
Since I drive a 2000 Buick with over 260k miles and perform my own maintenance, I’ve been through local junk yards hunting for the common bits for repair and noticed the GM vehicles seem to fare better than others, especially the small Toyotas.
But for any vehicle, the T-bone is the accident that seems most likely for some kind of award, take my word you should avoid this particular situation at all cost. Consider this my personal contributory warning to the world.
Mission accomplished! I’ve become quite comfortable with the quality of Chinese imports over the past couple of decades. The product range, sophistication and quality have steadily improved to the point where there’s no longer any reason to buy from the “American” importers.
I’d love it if the Burley Flatbed bike trailer I bought was made by a hippie collective (as Burley started out) in the Pacific Northwest, but now it’s “Burley Design” and made in China. As bike trailers go, it’s great. I’ve transported 100’s of lbs of stuff with it so far and will transport (literally) 1000’s more.
Tesla makes cars in the old Chevy plant in Fremont California. I had a buddy who worked there in the early seventies who bragged how his crew would put leftover lunch sandwiches in the door panels of the small Chevies they were building. His hourly was twelve times the minimum wage. I wasn’t surprised when Chevy closed that plant. A friend’s father built Ramblers in Kenosha Wisconsin and put police whistles in the wiper assembly. Car whistled like crazy at forty miles an hour. I guess people decided they didn’t want whistling cars. I knew a guy who owned a motorcycle store selling big fat motorcycles and found a note with a crated motorcycle that read “I screwed (transliteration) up this motorcycle and now it’s your turn to find out how I did it.” Big Fat Motorcycle Company has been through several owners over the years. Okay, they did it to themselves. I don’t know much about cars. I know guitars. American-made instruments that I could’ve bought fifty years ago (not kidding) for three hundred dollars are being made now and selling for three hundred dollars. Wonderful instruments. They’re Chinese-made by former violin makers. I have two at home now. That is, guitars, not Chinese violin makers.
Don’t get me started on Chinese violin makers.
Two words: Scott Cao.
If you’re a violinista you know him. Great, great fiddles arguably as good at Stradivari’s or Guerneri’s products. A lot of the mystique around old violins has to do with the fact that wood hardens and matures.
I literally pulled a steel-string guitar out of a dumpster about 2 weeks ago, almost certainly Chinese-made, and it appears to be a damn solid “gitfiddle”. It will be kept company by my thrift store $15 Yamaha Chinese-made nylon string geetar.
Do people honestly think Joe Rube is any different if he left a small town in the USA or China? Joe Rube just wants a good job in a factory, and will stick his nose to the grindstone.
Leftover sandwiches in the door panels? How frequently? And he was earning thirty some dollars an hour?
Police whistles in the wiper assembly?? You mean to tell me the man purchased and brought to work police whistles and then found the time (on a busy assembly line) to somehow attach these whistles to the wiper assembly of the cars???
Maybe, just maybe such a thing might have happened once but I believe that basically these are old wives tales- like the guy supposedly earning fifty-plus bucks an hour moppin’ the floors at some auto plant or other.
My friend then you do not understand the mind of a union worker.Give me more and i will do less.
Beer and soda cans, rattling around inside Doors.
Were a regular source of”rattles ” in those new rattly US vehicles, particularly GM ones.
Ask the guys who got paid to take them our under warranty.
Sometimes we used to wonder if it was a union “Make Work” program.
the china profit contribution to total profits [2/9.4 billion] is over 20%. that is not only extremely significant but rather enormous as it is approaching a quarter of all profits. I would not dismiss this as thin.
I deal with Asia on a regular basis for electric bikes and electric assist kits.
The thing to realize is they LIE and CHEAT on everything, and I mean EVERYTHING. But they still manufacture so cheaply, and so inexpensively, that you simply cannot compete. There is no real manufacturing here in the US anymore. Just basically assembly of chinese made. US made is not so much a badge of quality, but a marketing gimmick to tell buyers that the so called profits are going to pay the wages of Americans. Everyone today basically buys the cheapest made, and throws it away if it fails and buys another. There is nothing anyone really wants to repair, especially those of Millenial Age or Gen Z.
Chinese buying ‘GM’ is in name only, and really Chinese made, with GM ‘logo’ so effectively a white labeling of made in China, using US trademark of “GM.” Every single electric bike is made in China, or Taiwan, and its effectively ‘white labeled.’ Maybe 100 or more brands now, and new ones coming on line every day with a new name, or white label, describing how ‘genius’ the designers are. Really even those ‘designer’s’ are not engineers, even, just fashion and merchandizing or someone with no degree who conceptualizes, then has the chinese ‘engineer it’ which really means they copy something already designed or built elsewhere, with crappy engineering. When you get down to it, its this way with nearly every product in any industry. What Trump meant about MAGA, was not about making manufacturing great again, or American military better, or its society great again, or better jobs or better pay, but really it was about Make America Marketing Great Again, because that is all we are. We are marketers, or traders, or importers, or servicers. Soft stuff. Concepts, ideas, moods, mostly crap. We are not builders or makers or designers in the true sense. Sure there are niche things that might be built here, but they are novelty products.
It’s -9 degrees Celsius outside in Minneapolis, and there’s snow on the ground. Minnesota does have some manufacturing from Arctic Cat and Polaris if you want/need a snowmobile, eh?
With algo’s such a rage:Surly one could be capable of calculating the lost economics of each asian import. this should include costs related to plant through lost F.I.C.A. : VAT accordingly directly to deficeit.Our country existed on import taxes when it was young.
Thus a company wouldn’t send our jobs overseas and import our own products. If they want to produce over there then they can sell over there.
This would tend to put cost of labor on an even plane.
And now GM is importing their made in China Buick Envision to the US. I would imagine this is just the start.