GM plans to sell cars Made in China to US

Sounds like another GM decision based on today's financials only, not long term consequences.

 

Not at all. I only makes sense that GM would build some cars overseas and ship them to the US.

I suspect the Chinese models GM will import to the US will be Buicks. The Chinese love the Buick brand and Buick is by far GM's best selling brand in China. All of these Buicks are built in China for the Chinese market.

In the US, Buick is a niche player at best only selling a total of 137,000 cars in 2008. So it makes sense for GM to build all Buicks in China and ship a small number to the US.

http://www.autonews.com/article/20090427/ANA03/304279961/1131

 

It makes financial sense, but not long term product sense. Time will tell. It is very clear to me that with only financially trained CEO running the shop, all previoius GM decisions were based on the next quarter targets, not the next decade. I see nothing to indicate any fundamental change.

 

Why doesn't assembling a car model in the country where the majority of those vehicles are sold make product sense to you?

 

Yes it does...on the surface. It's what is going to happen under the surface that I am refering to.

GM is dying. Most all of the decline is due to bad strategic decisions over the past couple of decades. Every single one of the individual decisions made "sense" in the short term, but the long term effect was to reduce GM market share to less than half of its high.

This falls in the same category. The decision today is to start importing some vehicles from China. Is that going to increase GM's market share or help reduce it more? e.g. Would a slightly cheaper Buick revive the Buick name, or would it make the Buick a car to avoid?

 

If it is Buick, it's the same land barge that doesn't sell here. I'd hope it was that new Chinese clone of the volt. Now THAT would be something! Well, Malorn hated it when Chinese (and Canadian & Mexican) parts became part & parcel with the GM brand ... he'll LOVE hearing about a 100% Chinese GM product. Maybe if there going to sell the Volt clone, Malorn WILL sell me one after all.

 

Again why is it short-sighted to build a vehicle in China?

China is a huge auto market. It is currently the largest in the world due the the downturn in the US market. GM is a global company and builds and sells vehicle all around the world. GM is profitable and growing in China. (They increase sales in China 6% in 2008 selling 1.1 Million vehicles)

2008 sales: ---------------- Volume --- % Change
North America ------------ 3.5 M ---- (-21.1%)
Europe --------------------- 2.0 M ---- (-6.5 %)
Latin America / Africa ---- 1.3 M ---- (+3.2 %)
Asia ------------------------ 1.5 M ---- (+2.7 %)

Note that only 42% of GM's sales are in North America.

It is GM North America that is bankrupt. GM Asia Pacific, GM Latin America are making money. If "GM" declares bankruptcy in the US it will be GM North America that will enter bankruptcy not their international companies.

For GM to have a future they will need integrate and consolidate worldwide production. Vehicles will be built in their primary market. Since 65% of Buicks are sold in China I would expect than GM would build the majority of Buicks in China. If they want to fill a gap in their US model line they would be wise to build a few extras at their Chinese plant and ship them to the US.

You assume that a vehicle built in China will be an inferior product. Why? The computer I'm typing this on was built in China by Apple. China makes parts for Boeing Dreamliners. Toyota is now building the Prius in China. Quality depends on design and quality systems, not the nationality of the person that screws together the components. There is no reason to believe that a Chinese made GM car would be any better or worse than a American made GM car.

EDIT: The Chinese Buicks are pretty nice cars and far more modern than what GM sells under the Buick brand in the US. This is the 2009 Buick Regal sold in the Chinese market:



It is built on the Epsilon II platform that the 2009 Opel Insignia is built on. The Insignia was voted the 2009 European Car of the Year.

 

The steamship company I work for has gone from having our required shipyard periods, which used to be done in the USA, done in Korea, and then for the past 10 years in China. My ship just came back from a 60 day shipyard period in Dalian, China. The previous yard period, 5 years ago, was in Nantong.

Believe me, the quality of their work is in no way comparable to South Korea, Japan, or here. However, their prices can not be beat, not even close.

I have been through many shipyard periods and I have never seen poorer quality than in China. Their sole priority seems to be to get the ship in and out as quick as possible and to hell with the quality of the work.

Don't get me wrong, I work with agents and officials in China all the time and they are truly wonderful people. But, the culture (so far), doesn't seem to put as much importance on quality as Korea, Japan, or the USA. IMHO

I would hate to be the Captain of a ship just built in China. New ships are a pain in the butt, but one built in China would be even more so.

In my remaining lifetime I could never see buying a car built in China.

Please don't take this as any kind of an indictment against Chinese. I love the place and particularly the people I work with, especially Shanghai, and will be there again in June for a week or so.

 

It really depends on who is doing the work.

Companies that I have worked for source many components from China. What we have found is that the quality varies from abismally horrible to world class. The deciding factor is who you do business with. My former company did business with suppliers from around the world. Many of those US, European, Japanese, Korean companies also had factories in China. When parts came into our plants for receiving inspection our inspectors couldn't tell whether the parts came from China or Ohio without looking at the paperwork. The reason was because that gear supplier based in Ohio set up a plant in China with their technology and quality systems. The difference between the plant in China and the one in Ohio was the people working on the line.

On the other hand local Chinese suppliers were horrible back-alley type places. No heat, no lights, no quality system at all. With these suppliers the initial pieces were perfect but production parts were junk. We very quickly decided to only source Chinese parts from multinational companies that manufactured product in China.

If you are afraid of Chinese parts you will need to avoid flying:

"Today, more than 3,500 Boeing airplanes -- one third of Boeing's world fleet -- have major parts and assemblies built in China. Examples of major parts and assemblies built for Boeing by the Chinese industry include the 737 horizontal stabilizer from Shanghai Aircraft Corporation, 737 vertical fin from Xian Aircraft Corporation and 737 tail section modules from Shenyang Aircraft Corporation."

Boeing: Boeing 787 Highlights $600 Million in Contracts with Chinese Suppliers

 

I have no issue with building Chinese autos for the Chinese market. It is the replacement of domestic manufacturing with overseas manufacturing by a (formerly) US automaker. This does nothing to reverse the continuing decline of GM market share in the US. If fact it probably accelerates the decline. Again, time will tell.

Great numbers to clarify my point. I agree that GM's future is overseas since it's future domestically is coming to an end. As this trend continues, eventually only 0.00% of GMs sales will be in North America. I guess that is the fundamental difference in our viewpoints. I'm saying this is bad management and you're saying it is the only sensible management. Am I missing something in your response?

And how did they get to this condition? What is to prevent it from eventually spreading to GM's overseas operations?

This completely ignores why the (formerly) biggest auto company in the world has absolutely huge "gaps" in their US model line. I cannot stress enough the difference between short term payback and long term payback. Is there a short term payback doing this....probably. Is this a good step to rebuild and recover as a US automaker making US autos......no way.

I actually never said anything negative about China and do not have any reason to demean the Chinese. GM is going there because GM leadership doesn't have the smarts to figure out how to succeed here. My issue is with GM management only.

So why did GM decide that the US should get an inferior car?

 

What are the huge gaps in GM's line-up?

 

The only thing that will reverse the decline of GM's market share in the US is making quality vehicles at a competitive price. Country of manufacture has nothing to so with quality so it really comes down to competitive price.

I only makes sense from a long term perspective to manufacture vehicles in their primary market. It makes no sense to build all vehicle, especially low volume vehicles, only in the market they are sold. If GM sells 300,000 Buick Regals in China and 50,000 in the US, the car should be built in China with the small volume required for the US market shipped from China. Likewise GM would be wise to build some models in the US and ship them to China.

I don't see why you believe this will accelerate the decline of GM's US sales. You seem to think that GM should build 100% of cars sold in China in China and 100% of cars sold in the US in the US. This would lead to way to many small production runs.

You assume that GM's decline in market share will continue. Given the quality of their recent vehicles I expect that GM will stabilize market share in the US. I'm not saying that GM should abandon the US market.

Any successful automaker will make the majority of their vehicles in the market where they are sold. This reduces transportation costs and eliminates the risk of currency fluctuations. That doesn't mean that they will make all vehicles in those markets. Small volume vehicles will be made in the market where the majority of sales occur and then shipped in small quantities to other markets. It simply doesn't make sense to tool up additional factories to make a small quantity of vehicles.

GM's current problem is that they have way to many brands and models. This has lead to them redesigning vehicle every 10 years instead of every 7 year like their Japanese rivals. GM's solution to this problem is to reduce brands from 8 to 4. They are also relying on global platforms so that they aren't building a different car in Europe, Asia, South America, and North America. Instead they will build one car and sell it in multiple markets. Part of this strategy with rely on exporting cars from one country to another. Again, it makes no sense to tool up factories on every continent to make the same car.

You say you have nothing against the Chinese but then say that if GM imports 50,000 cars from China it will accelerate their decline. I don't see have those statements go together. Why will GM importing 50K cars from China lead to the overall decline of GM in North America? You seem to think that if those same 50K vehicle were made in Ohio the result would be different.

GM went to emerging markets because those are the only markets that are growing. It was important to get into these markets early instead of waiting for them to mature and then trying to steal market share from other manufacturers that are firmly established.

In general it is because the American market is the most heavily discounted market in the world. It is difficult to sell small cars in the US market at a profit. Part of this stems from American's reluctance to pay for a small car with premium features but instead buy a larger but less equipped vehicle. On the other hand the European and Chinese markets are willing to buy premium small cars. A combination of expensive fuel and congestion means that bigger isn't always better but they still want nice cars.

 

The huge one is the high mpg hybrid. The next one is the high mpg big hybrid (Ford Fusion hybrid, Camry hybrid). The next one is any high end small car (something to compete with smart car, Mini-Cooper)

 

With all due respect, there were 8,385 prius sold in April, 2,096 Insight, and 3,657 mini coopers. Do you think these niches are why GM is out of cash?

 

GM's success or failure will depend on how their next generation of mainstream vehicles sell not if they enter small niche segments.

 

Absolutely, compact car, small suv, midsize car, midsize crossovers and large pickups represent over 70% of the entire US market

 

Little is accomplished by assuming thoughts that don't exist and then shooting down those non-existent thoughts. GM is failing faster than Ford. Why? In the 70's after the oil embargo, the opposite was true, Ford was having more problems than GM. Why? GM market share has been shrinking relentlessly. Why? What has changed at GM to reverse this entire decline?.....Firing the financially oriented CEO and replacing him with.....a financially oriented CEO?

I'm not shooting from the hip here. I've paid close attention over decades. The most consistent explanation keeps coming back to the common management disease of focusing on a quarter by quarter profit basis. Making long term strategic commitments and then sticking to them is too hard (e.g. Saturn). The list goes on. Add this to the list.

So what has changed inside GM that is going to make this happen? What has changed to make GM vehicles significant better to the consumer over every other vehicle? (Some Buicks from China?) It seems that Ford has been making the better internal changes necessary to increase US market share, not GM. That's why I keep repeating; "Time will tell". For GM to succeed, it needs to start being better than Toyota, better than Honda, better than Ford, etc. I don't see it (at least not yet).

Agree. GM is now in the position of having smaller quantities of vehicles after being a world leader with large quantities of vehicles.

We really have cause and effect reversed in this discussion. Of course GM has too many brands and models as their market share shrinks by gigantic factors. This in turn requires them to consolidate....only to watch them continue to make the same decisions that continue the loss of market share. This decision does nothing to break this cycle. What you describe are the proper actions for slowing the decline. It does not reverse the decline.

Think this through!!!! This absolutely will not be a static situation. Either it will "succeed" or it will "fail" by GM standards. If it succeeds, then be prepared for GM to close more US manufacturing and move it to China. If it fails, then GM gets even smaller.

Of course it's difficult to sell small cars at a profit. It's an extremely competitive business worldwide. That's why first rate management and leadership is needed. GM does not have that. That the major reason they are failing.

One of the reasons I'm aggitated at this situation is that with the right leadership, US autos, built in the US, would be world class. Instead, we are seeing situations where we are moving US manufacturing overseas as the quick way to slow down the decline.

 

No. My prime point has been the decades loss of GM market share. The problems of the present economy have almost every automaker hurting...as you know 10 times better than me!

I try to keep my replys somewhat concise, but let me expand on a couple of issues.
1) I'm in your camp that the continuing sustained loss of US auto manufacturing only hurts the US. There is no upside. We are not talking about getting a niche vehicle from China. GM is setting up for delivering a potential mainstream vehicle from China.
2) Don't think that I'm an enemy of GM. 90% of the company contains more than enough smarts and capabilities to be world class. Unfortunately, most of the 10% that is second rate is the inbred leadership / management / board of directors. Breaking this logjam of second rate deadweight is the real solution to GM's long term problems. I'm actually hoping that the dealers are able to buy Saturn and take control. They would certainly change internal priorities dramatically. Dealers are not going consider Wall Street as the prime customer. They are going to consider themselves as the prime customer. I would think most GM dealers are madder at GMs bosses than I am.
3) There are symptoms and then there are root problems. The GM lack of a viable high mpg hybrid or high end small cars is not the root problem, but it is a symptom. The problem is (yet again) focusing exclusively on the market of here and now and ignoring the market of 5 to 10 years from now. The lesson of the 70's oil embargo really provided a solid reason for having a balanced lineup of vehicles. A lesson completely forgotten by GM, but not by Honda or Toyota.
4) The Malibu hybrid with it's whopping 2 mpg increase had to drive the design engineers at GM stark raving mad. This had to be the result of insane financial constraints than forced the designers into a worthless result. Whereas Ford did let the designers go all out for the Fusion Hybrid....with excellent results. A prime example of why Ford has a brighter future than GM.

 

You say you are paying attention but then claim nothing has changed.What has change at GM?

• The UAW has agreed to massive wage and benefit cuts
• The UAW has taken over GM's retirement healthcare liability
• Billions of dollars of debt has been swapped to equity.
• 50% of GM's US brands will be cut.
• GM is going from 86 individual models down to 30 something
  [*)GM is moving production to global platforms

How does this benefit GM. Their cost of production goes down so they can spend more money per vehicle in R&D and tooling. Since they are no longer tooling up 8 different version of a instrument panel they can spend a little bit more to make a better one and still make more money.

The latest vehicles to come out of GM have been world class. There is no better example than the Malibu. GM took aim at the best selling car segment in the world and simply made a better mid-size car.

• The Malibu was the 2008 car of the year
• It is #1 in initial quality
• It cost less than the competition
• It gets better fuel economy than the competition

As a result GM has not been able to make enough of them and even as they are idling other assembly plant for the summer they are adding shifts to the plant that makes the Malibu. (I've driven one and it is a very nice car)

Likewise the Chevy Traverse has been a big hit as I expect the Equinox will be.

Instead of trying to make 86 mediocre vehicles, GM is concentrating on making vehicles that lead their market segments and so far they have been hitting the target. GM is making world class vehicle and building them in the US. They will also make world class vehicles for other markets and build them in those markets.


Ford has also been making huge improvements. They are also moving to global platforms and the replacement for the Fusion and Focus will be global platforms instead of obsolete older platforms. However, the only reason Ford is not right next to GM is that they decided 2 years ago to mortgage EVERYTHING including the blue oval trademark to raise cash. They are burning through that cash quickly so only time will tell if they will make it to the other side of this recession without government help.