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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
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
