[tgagneguam]

Imagine if GM could get a fresh start in the USA like this. Imagine, Buick with an aura of prestige, luxury, and quality.

GM: Gunning It In China

It's splurging on plants and hoping that the economy won't hit a wall
Imagine a General Motors Corp. (GM ) that could start from scratch. It wouldn't be saddled with billions in pension and health-care costs. Its manufacturing costs would match those of rivals like Toyota Motor Corp. (TM ) and Honda Motor Co. (HMC ) This GM would be something like the well-oiled machine that was building new plants and boosting its U.S. market share throughout the early 20th century. In such a world, GM wouldn't suffer from a reputation for poor-quality cars -- even moribund brand names like Buick would be held in high esteem.

GM's investment is paying off big. Its sales in China surged 56% through the first four months of this year, giving the auto maker the No. 2 spot (behind Volkswagen) with 11% of the market, up from 9.3% last year. More important, GM hasn't had to shell out $4,000 per vehicle in incentives to lure those new buyers. The $437 million profit GM made last year in China, selling just 386,000 cars, compares with an $811 million profit made in all of North America on sales of 5.6 million autos. In the first quarter of this year, GM's total China profits quadrupled, to $162 million.

For a car giant that is still on the road to a full turnaround, that's a nice chunk of change to offset its seemingly endless losses in Europe. But if China car sales grow as Wagoner expects, the increased scale there could prove more significant, helping GM stave off the worldwide challenge from Toyota. GM predicts that China will surpass Japan as the second-largest vehicle market around 2007 -- and could pass the U.S. by 2020. By establishing its brands and seizing share now, Wagoner thinks, GM will be able to mine profits for years to come. Says Michael J. Dunne, president of Bangkok consulting firm Automotive Resources Asia Ltd.: "China may be the perfect case study for the re-creation of GM."

GM'S FRESH START

And for those of you who are so inclined, today Businessweek online is also featuring a snapshot of some of GM's financials, in the event that low P/E ratios interest you.

Business Week Online

 

[banzai79]

It will be interesting to see how this plays out. Chinese built Cadillacs? If the Chinese middle class is truly numbering in the 10's of millions, and getting larger, then clearly China is a huge threat to the U.S.'s world economic stature, as our middle class shrinks.

 

[tgagneguam]

I predict it will be quite some time (a half century?) before any country's economy surpasses the USA. Though I've heard some slightly different figures, the site below demonstrates how the USA is filled with hyperconsumers. Our stock market is more stable and larger than any other nation's/group of nations's stock markets. And our currency is quite possibly the most stable and valuable around the world. These types of things don't develop overnight, so people's fears of a Asian-dominated world are a bit premature.

WORLD GNP

 

[mgescuro]

Originally posted by banzai79@Jun 14 2004, 02:36 PM
It will be interesting to see how this plays out. Chinese built Cadillacs? If the Chinese middle class is truly numbering in the 10's of millions, and getting larger, then clearly China is a huge threat to the U.S.'s world economic stature, as our middle class shrinks.

*ding ding ding ding*

But there's a whole lot more to that. It's the effect of globalization, which I won't get into. There are a lot of advantages and a lot fo disadvantages to it.
Frankly, if China can produce cars at a lower cost that those "highly paid yet unskilled" UAW workers, then it should be a wake up call to all those people.

Problem is... the US isn't the only one who will be feeling the effects. Western Europe will too. They open up shop in Eastern Europe, on.y to find out that setting up shop in China/Asia is cheaper, so they move there... and that leaves Eastern Europe screwed... so they have to find new things to do.

In the long run... it all balances out.

The US, as it has been in the past couple decades has shifted from a manufacturing based economy to a service based economy. And the US has done just fine. In fact, it has survived when Europe and Japan have precipitously declined.

I wouldn't worry.

 

[awalbert88]

If China and India become western-style consumer nations any time soon, we'll run out of iron, aluminum and oil in the next century. Think about that... you're talking about tripling oil and ore consumption without really increasing known supplies.

I also question how long the Chinese economy can actually sustain this. They are not a nation of consumers yet, with maybe 1-2% of their people able to afford any sort of automobile, let alone a Caddy.

Also remember that the Chinese government still rules with an iron fist, and if some enterprising dealership or factory owner for GM gets out of hand and decides he wants a say in the politburo, I wouldn't put it past them to have the PLA go crazy with some tanks.

Don't get me wrong, I'd love to see China become a prosperous and democractic nation by way of outside economic influences like this, but it's a very dangerous game to be playing, and more than a few toes will be stepped on (or crushed by tank treads) before that happens.

 

[nikivee]

They will build Cadillacs in China paying workers $5 an hour if that, ship them back to the states and sell them at current pricing to make bigger profits for GM. For those that think the Chinese are going to buy Cadillacs are dreaming.

I like that. Cadillac. Made In China!

 

[PURPLEIMPALA]

We have been giving away our standard of living for 25 or 30 years, thanks to 1) a concerted effort to elevate the standard of living in India and China and the 3rd world in general by lowering our own, and 2) greed by corporate executives. In My Humble Opinion, corporate executives aren't worth the salaries they are paid. I know that one of these executives should be paid much more than the working slobs like me, but tens and hundreds of millions of dollars a year is excessive. When Daimler-Benz bought Chrysler, they found that Chrysler's execs were paid an average of ten times their own execs. IMHO, this excess salary should be plowed back into the corporations, to make them more healthy, and pay dividends to shareholders. Anyway, the notion of an affluent middle class in China driving millions of Cadillacs is just absurd. P.I.

 

[Michael_S]

Originally posted by PURPLEIMPALA@Jun 18 2004, 12:42 AM
We have been giving away our standard of living for 25 or 30 years, thanks to 1) a concerted effort to elevate the standard of living in India and China and the 3rd world in general by lowering our own, and 2) greed by corporate executives. In My Humble Opinion, corporate executives aren't worth the salaries they are paid. I know that one of these executives should be paid much more than the working slobs like me, but tens and hundreds of millions of dollars a year is excessive. When Daimler-Benz bought Chrysler, they found that Chrysler's execs were paid an average of ten times their own execs. IMHO, this excess salary should be plowed back into the corporations, to make them more healthy, and pay dividends to shareholders. Anyway, the notion of an affluent middle class in China driving millions of Cadillacs is just absurd. P.I.

Well, in the case of Chrysler the problem resolved itself... the underperforming execs were overpaid, and as a result the company was (effectively) bought because it was doing poorly.

A company that overpays its execs suffers for it in the end, and gives more competitive companies the edge. I'm not a hard core fan of capitalism, but in this case I think it works.

 

[mgescuro]

Originally posted by nikivee@Jun 15 2004, 10:22 AM
They will build Cadillacs in China paying workers $5 an hour if that, ship them back to the states and sell them at current pricing to make bigger profits for GM. For those that think the Chinese are going to buy Cadillacs are dreaming.

I like that. Cadillac. Made In China!

Much to the disgust of the UAW.
Sorry UAW... the era of $32/hour pay to tighten a few screws is over.
Time to work and cooperate with GM and the others.