Holden Boss Vows To Take On Cheap Chinese Imports

[JoeT]

No Fear

GoAuto E-News
14 August 2007
www.goauto.com.au

Fresh from Shanghai, Holden’s new boss vows to make it difficult - not easier - for Chinese car-makers to succeed in Australia.

The spectre of half-price cars from China flooding Australia and other Western car markets was being overplayed and was unlikely to happen, the new man in charge at GM Holden told last week’s AADA Convention on the Gold Coast.

Chris Gubbey, fresh from six years in China where he was vice-president of Shanghai GM, General Motors’ flagship joint venture in China, said that Chinese car-makers faced increased costs to improve the quality and equipment levels of their cars before they could compete in the Western markets.

He said that while the Chinese had lower pay rates, labour represented only 10 per cent of the cost of a car. On the rest of the car, the Chinese car-makers “faced the same cost pressures as every other car manufacturer to
get into a developed market”.

“A lot of the cost of the product is in meeting legislative requirements in developed markets and it is about being able to offer all the technical things people want on their automobiles,” he said. “They have to pass the crash tests. We have already seen some of the failures (in Europe) and they are not going to sell many cars if they are failing crash tests.

“So are you really going to see Chinese cars at half the price that we can produce? I actually doubt it.”

Mr Gubbey said that there was strong pressure for wages in Chinese car plants to increase because the cost of living was rising in cities like Shanghai (where GM has plants) which was becoming “the Manhattan of China”.

“So I think those labour costs are going to climb quite quickly,” he said. “Will we be paying less for Chinese cars? In real terms, you will be getting less if you are paying substantially less. At the end of the day the buying public will start to recognise that.”

Click here to continue article

The Chinese Are Coming! The Chinese Are Coming!
Growing Car Imports Costing Australian Jobs
GM's Chris Gubbey Holden's New Boss, As Denny Mooney Moves Back To The US

New Holden chairman and managing director Chris Gubbey

[mikmak]

Originally Posted by JoetT

“Will we be paying less for Chinese cars? In real terms, you will be getting less if you are paying substantially less. At the end of the day the buying public will start to recognise that.”

Hasn't happened with the Daewoos yet

[johnny smallblock]

Originally Posted by JoeT

He said that while the Chinese had lower pay rates, labour represented only 10 per cent of the cost of a car. On the rest of the car, the Chinese car-makers “faced the same cost pressures as every other car manufacturer to
get into a developed market”.

But how can that be? I thought all GM's problems were because of the UAW?!?

[mbukukanyau]

Originally Posted by johnny smallblock

But how can that be? I thought all GM's problems were because of the UAW?!?

Do you know what 10% of $40,000.00 is ? $4,000.00
That can make or kill a deal

[steinravnik]

China can't get toys and toothpaste right. Who's going to trust them with a car? Certainly not myself.

[importedtuna]

Originally Posted by mbukukanyau

Do you know what 10% of $40,000.00 is ? $4,000.00
That can make or kill a deal

Especially when the cars GM focuses the most on selling are SUVs and trucks in that price range.

[johnny smallblock]

Originally Posted by mbukukanyau

Do you know what 10% of $40,000.00 is ? $4,000.00
That can make or kill a deal

$4000 is a big deal?
$4000 over 3 years of car ownership is $27/week.
$27 a week is 9 gallons of gas at $3 a gallon.

The average person puts 12K miles a year on their car. Or 1K miles a month. Or 250 miles a week.

A 35mpg car uses 7.1 gallons to cover those 250 miles.
A 15mpg truck used 16 gallons to cover the same distance.

That's a difference of 9 gallons (or $27).

I wish I had a nickel for everytime I heard someone defend gas guzzlers on the site by saying "if you can afford $40,000 for a car you don't care about gas prices." Well the fuel costs that people dismiss are the same as what you're now calling a deal breaker.

That's just funny.

[tgagneguam]

On a somewhat non sequitur note, I sometimes secretly pray that the recent spate of toy recalls-Mattel is at 18 million Chinese-made toys being recalled and counting-will permeate other industries and potentially preempt a worldwide Chinese automaker invasion. It's fine that Chinese companies produce goods on the cheap, but it's also time that they rightfully suffer an image correction: cheap products do, it seems, come at a cost. Do I want to be in what appears to be a Chinese-made death-trap-mobile just because it costs half of what its competitors cost? Not so much.

While it's not a solid long-term strategy to wish success for other companies vis-a-vis failiure by competing companies, I do think the Chinese earn praise for cheap products yet get little in the way of criticism for poorly made products.

Are the chickens are coming home to roost?

[Havasavana]

If it's true that labor represents 10% of the cost of a car, I wonder what percentage labor represents of the other zillion-plus objects we import from China. Surely at least some of this stuff involves less than 10% labor cost. Yet somehow, it's apparently cheaper to bring in Chinese-made things than make them here. I recently bought a little USB storage gizmo called a 'jump drive', among other things. It has a Toshiba label on it, it's 1GB and it cost $10. Of course it had nearly impenetrable wickedly tough plastic packaging around it. Somehow they can import what they need in the way of raw materials, ship these across China to the plant, make the things, package them, ship them to the US, truck them to the warehouse, then the store, pay for someone to hang them on their hanger, cool the store, keep the lights on, etc., and I can get this thing for $10 an have everybody in the chain make a profit. Admittedly I am operating with very little in the way of facts, but it just makes no sense to me this can be done if labor is such a small part of the cost.

[hq308]

Originally Posted by johnny smallblock

But how can that be? I thought all GM's problems were because of the UAW?!?

I think you'll find he was refering to the cost of making cars in Australia, we don't (as far I know) have the union problems you have in the U.S. You might find the UAW liabilities add a considerable cost to the manufacturing, if the worldwide standard is around 10% of cost for labour and for U.S built cars it's higher that's obviously going to have a big impact on the finished price and therefore make it harder to compete.

[Tequilujan]

Well, 10% of the cost of a $40000 car is $4000. Not much, but what about the other 2 - 3K that had to go to pension and health care plans. That is definitely a problem.

[GMGIRL]

PERSONALLY, WATCHING THE CHINESE CARS PRETTY WELL COMBUST WHEN TESTED TELLS ME THAT THEY WILL BE LUCKY IF THE CAR EVER PASSES SAFTEY RATINGS. ONCE AGAIN, THIS ISN'T TOOTHPASTE OR TOYS WE ARE TALKING ABOUT...THESE ARE VEHICLES THAT PEOPLE WILL BE DRIVING ON OUR ROADS AMONGST FAMILY AN FRIENDS! I KNOW ONE THING FOR SURE...IF THESE CARS EVER MAKE IT ON TO THE ROADS...THAT'S THE DAY I SURRNDER MY DRIVERS LICENSE!!!!!!!!!!

[TORRED1]

Originally Posted by johnny smallblock

But how can that be? I thought all GM's problems were because of the UAW?!?

Exactly what I thought, spot on.

[TORRED1]

Originally Posted by mbukukanyau

Do you know what 10% of $40,000.00 is ? $4,000.00
That can make or kill a deal

10% is still 10%, does that mean that 10% of a 60K lexus or mercedes is any better or worse, Id be willing to bet that 10% is pretty close to industry standard no matter where you go. It's not the labor rate that is killing GM, it's the benefits and retirement. GM needs to get smart and go into these negocians and flat out say that wages are off the table, that they dont want to take anyones current salary away, but that benefits and retirement are going to be cut, because this is where the true problem is.

[TORRED1]

Originally Posted by Tequilujan

Well, 10% of the cost of a $40000 car is $4000. Not much, but what about the other 2 - 3K that had to go to pension and health care plans. That is definitely a problem.

correct correct correct!!!!!