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TOM WALSH: GM shows the skeptics were wrong

June 8, 2004


Conventional wisdom strikes out again.

During 1994 and '95, when General Motors Corp. was negotiating its joint venture to build midsize cars in communist China, the Chinese car market was tiny, about the size of Poland's, a poor country with only one person for every 30 in China.

When GM concluded its deal in December 1995 to make Buicks in Shanghai, automotive historian David Lewis of the University of Michigan joined a chorus of skeptics who suggested it would take GM until 2010 or beyond to reap any rewards. "The question is whether GM and China can even consummate this deal," Lewis told the Free Press at the time, "and long-term whether it will be to GM's advantage to have invested a billion dollars in China."

So much for the skeptics. Today, China is the world's third-largest auto market, and GM is making so much money there that the company is investing another $3 billion.

Favorites lose

Isn't it funny how often a pack of pundits and so-called experts can be so wrong?

Just this past weekend, the nation's horse racing experts proclaimed Smarty Jones a virtual lock to win the Belmont Stakes and thus the Triple Crown - until a 36-1 longshot named Birdstone passed Smarty down the stretch. And how about the vaunted Los Angeles Lakers being humbled on their home court Sunday by our Detroit Pistons?

Hindsight, of course, often reveals that stunning events should not have been all that surprising.

Smarty Jones, for example, had won the Kentucky Derby and Preakness races impressively. But the Belmont is a much longer test, and Birdstone erased Smarty's big lead over a final quarter-mile that didn't exist in the earlier races.

Buick is a winner

In China, GM looked beyond conventional dogma that dealing with the communist regime would be a huge hassle, if not a sinkhole for cash that GM could ill afford to lose.

Jack Smith, GM's chief executive officer at the time, wasn't dissuaded by household income data showing that most Chinese residents would not be able to afford a car in their lifetimes.

"When we looked at the economic data, there was a large portion of the country - the southern and coastal provinces - that had a GDP (gross domestic product) per capita that was very close to what you saw in central and eastern Europe," Smith recalls, "and those provinces had maybe 400 million people. They clearly could afford a car."

GM had bold visions of a big market for personal cars, so it offered to call its first Chinese car a Chevrolet.

But GM's partner, Shanghai Automotive Industries Corp., didn't see China as a personal car market yet. It saw midsize cars as chauffer-driven limousines. And Chevy was too blue-collar a brand for that.

So GM offered Cadillac. Nope, said the Chinese, too highbrow. How about Buick? "Well, we didn't offer Buick outside North America at that time, but we said, well, if you want Buick, we'll do Buick," Smith recalls.

Full Article Here


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This Chevrolet porridge is too cold.
This Cadillac porridge is too hot.
This Buick porridge is just right. B)

All this is great for Buick. They need the image boost.
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