GM plans to sell cars Made in China to US

True, these are "changes", but changes that do not translate directly into increased market share, only survival. Most of the above are changes forced upon GM by bad decisions made earlier coming home to roost. Hardly what one could call management strategic moves. Now I will agree that if followed through with more substantial changes in design and engineering, then there may be some hope. I'm certainly not rooting for GM failure, but they have to do better than some very, very good competition to come out ahead.

Good point. Not going to minimize a success where they earned it. Let's see if they sustain it.....and keep the manufacturing in the US.

The proof is in the increased market share. As far as hybrids go, I would not consider the Malibu hybrid to be world class.

Obviously, they were looking a little farther ahead and planning a little better, if not much better. I do consider the Fusion hybrid to be world class.

 

How much product are the unemployed going to buy? Take the manufacturing job overseas and the worker there can now buy a car. The now unemployed worker here can't. How big is the new auto market in Michigan now? IF GM is making money everywhere else then the obvious solution for them is to abandon the US market. However, I doubt they are turning a profit anywhere.

If I'm going to buy a car full of foreign parts then it might as well be from a foreign manufacturer known for quality. If you want to sell cars in China then you have to build them in China with a Chinese partner. Closed markets guarantee local employment.

Toyota hasn't advanced the Prius far enough for me so (as of now) my next car will be "American made" in that it will be assembled in California.

 

I don't see GM getting back to the US market share they used to enjoy. To me it is important for them to stop their decline and hold. As smaller manufacturers are forced out of the market it will be important for GM to capture some of those customers. However, I don't see any one manufacturer holding more than 25% of the US market.

It is more important that GM can make money at their current market share. They need to plan based on their current reality not hopes and dreams that in 5 years that will be back to 25% - 30% US markets share.

I don't see GM's hybrids as being world-class either. They have good heavy duty technology but the BAS system is very weak. That doesn't surprise me though. GM has been clear they are not relying on hybrid technology to meet near term CAFE requirements. Instead they will rely on downsizing, direct injection (DI), turbocharging, and 6 speed transmissions.

The 2010 Equinox is an excellent example of the results. GM replaced the the 2009 Equinox's 3.4L V6 mated to a 5 speed transmission with a DI 2.4L I4 with a 6 speed transmission. The result was a lighter engine, with only 3 less horsepower, but 25% better fuel economy. In addition they dropped the price $2000.

On the hybrid / EV front there is the VOLT. I like the VOLT platform because it is a series hybrid and is very flexible. If GM finds that the 40 PHEV version of the Volt is too expensive they can offer it in 10, 20, 30, 40 mile versions. It is simply a matter of reducing the size of the battery. Likewise they could remove the ICE generator, add more batteries, and make a pure EV.

I simply don't see the reports that GM plans to import 50K cars from China as a sign that they are planning to increase off-shoring. 50,000 cars represents 1.4% of GM's North American sales. Instead this is a sign of global platforms and production of vehicles in the market were the majority of vehicle are sold. Traditional outsourcing of vehicles to countries with low cost of labor simple doesn't make sense today. Labor is a small percentage of overall cost and any savings in labor can quickly be erased by increased transportation and currency costs. I see the majority of vehicle sold in North America will be made in North America.

Toyota's current losses show the danger in maintaining the majority of production in one's come country. Toyota makes more than 50% of their total vehicles in Japan and ships these vehicle to the markets were they are sold. That leaves them exposed when oil prices rise and transportation cost return to 2007 / 2008 levels. In addition Toyota has to worry about changes in currency. As the Yen fell from 120 to 95 yen per dollar, Toyota is getting less and less for each vehicle the make in Japan but sell in the US.

Toyota builds the Prius in Japan:
Say the Prius costs 2,500,000 yen to manufacture.
In July of 2007 120 yen = 1 dollar
The Prius sells in the US for $22,000 and gets 2,640,000 yen
Toyota makes 140,000 yen or $1167 per Prius

Today the 95 yen = 1 dollar
So Toyota sells a Prius for $22,000 but only gets 2,090,000 yen.
Now Toyota is losing 410,000 yen or $4300 per Prius

The thing is, Toyota has absolutely no control over currency so they are at the mercy of the market. The can't just raise the price of the Prius $5000 to get back to their target level of profit.

On the other hand if Toyota build the Prius in Mississippi:
2,5000,000 Yen = $20,833 so I will use that as the US cost
Toyota sells a car for $22,000 and makes $1167. They do a bank transfer to bring the profit back to Japan and get 140,000 yen

Today the yen has dropped to 95 against the dollar but it doesn't matter as much. The Prius still costs $21,833 to build because the US plant is buying parts and paying people in dollars. They sell that Prius for $22,000 and still make $1167. Toyota does a bank transfer back to Japan and that $1157 x 95 = 109,915 yen. So the change in exchange rates only cost Toyota 30,085 yen instead of 550,000 yen

This examples shows the danger of making products outside of the market where they are sold. Profit and loss are dependent on transportation costs and currency exchange, two variables that a company has no control over. This is why I don't expect GM to import many cars from China to the US.

 

Let's keep our fingers crossed. It would be a very good thing if you, or anyone, can come back in five years and show that I was too negative about GM (even though I still am to a degree).

That's a very good analysis of the downside. But it is essential to understand the upside. There are two advantages that must be considered:
1) When things are good, then the profit can be significantly greater. While this has not been the case lately, many a consumer has decided to pay a Toyota premium to get what they considered to be worth the extra dollars. Right now the "equation" is negative, but it does not mean it was an unprofitable commitment overall.
2) The profit gain or loss is only for the final product. The other $20,000 still ends up in the Japanese economy for the most part. If not Toyota, then a whole lot of suppliers who will share a temporary loss with Toyota to ensure the manufacturing, jobs, and viable economy stays in Japan.

There is also a big picture. Japan is the size of California with half the population of the US. They do not have diddly for natural resources to support the population. It is essential for them to build lots and lots of stuff in Japan that is not used domestically but needed overseas to provide a workable economy. Shipping cost and exchange rates are major hurdles, but not justification for outsourcing their auto business anymore than they have to. The fact that they got this far, for decades with these constraints is amazing.

These lessons are being emulated in China.

 

I hope to follow in those same footsteps. (If we are talking about a very new car company.)

 

I love how you pic one of the worst recent economic months (April) for all manufacturers to illustrate a point. And what were the sales for Hummer in April? or Suburban? Maybe Yukon? ... sales are in the toilet for GM, even as Tax dollers subsudize the lion's share of their cost. Yet Toyota under estimated how many Gen III Prius' would sell, so they're having to ramp up production. And each time gas ratchets to the next level, the high mpg cars jump off the shelf. You keep calling it a nitch. That's the gm mentality, even as GM tanks.

That ratio is in quick transition as cheep oil peaks. The dumbness of urbanites driving full sized pickups that never see the use of the bed is going the way of the chariot. Again GM's bankruptcy is in part, because the short sided profit motive of gm blinds them to that reality.

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Since you asked:
Hummer H2 --- 152
Escalade ------ 1649
Suburban ----- 4424
Tahoe --------- 8162
Silverado ---- 26437
Yukon -------- 3623 (GMC version of Tahoe)
Total April sales of GM full-size body-on-frame trucks / SUVs = 40,824


GM has replaced the Chevy Trailblazer (and clones) with the Chevy Traverse (and clones). These new unibody SUV's are bigger in every dimension and heavier than the body-on-frame vehicles they replace. Despite the current economy these new vehicles have been a huge hit and GM is adding shifts at the plant where they are made and cancelled the summer shut-down.

Chevy Traverse ----- 8204
GMC Acadia --------- 4764
Buick Enclave ------- 3731
Saturn Outlook ------ 1446
Total Lambda Platform 14,414

http://www.gm.com/corporate/investor_information/docs/sales_prod/09_04/deliveries_0904.pdf

Hybrids are a niche right now. They make up 3.5% of new vehicle sales. It is a growing niche but still a niche.

 

When challenged on this issue last night on Lou Dobbs, the GM CFO said the 99% of the cars GM makes in China are sold in Asia. FWIW...

 

"quick transition"? Define that for me. Looks like your beloved Toyota had another stellar month.

 

Looks like GM will not be importing small cars from China into the US. They will be making them here instead. It may not be the cheapest way to do it, but it is the better way, IMHO.

 

One would have to put GM land barge sales for the prior 36 months or so (pick your own number), to give the numbers above any meaning. The bare numbers on Apirl fail to show how GM sales are in the toilet. Also, since you may have forgotten, April represents what ... maybe 1/2 of a Month for Prius Sales? Not too shabby for 1/2 a month. ESPECIALLY in a horrible economy. And the niche as you call it grows in two ways ... the not-soon-enough demise of the (seldom utilized) land barge continues to increase the ratio of hybrids ... notwithstanding the ever growing actual number of hybrids being manufactured. When hybrids first hit the market, selling their first few hundred thousand, what did GM call it? Just a P.R. ploy? Now hybrids are starting on their 2nd million, and at some point as the hybrid # grows, and as the land barge # of sales diminishes, eventually the niche insult will finally die off.

Isn't saying hybrids "... make up 3.5% of new vehicle sales" tantamount to saying life preserver sales are low before the tidal wave gets close? Ultimately, the numbers will differ in a very obvious way. What does it matter whether hybrid sales hit 10%, 40% or more in 3 years or 30? In fact, the delay is what's plain ol' stupid.

Your long winded play with speculative numbers, to show that GM may hopefully be ok some day (either by making product in China or otherwise) failed to address one other aspect. More & more buyers understand that GM leadership was completely corrupt ever since the 1920's (see the documentary GM: Taken for a Ride) and getting rid of Lutz & Wagoner changed nothing, any more than Fidel Castro putting his brother in charge of Cuba. Some may think it's only a misunderstanding that GM's cancerous leadership runs deep. Their own history says otherwise.

Oh, does that time frame matter to a GM car salesperson? Does the U.S. transition to less polluting, more efficient transportation have less value if it takes 10 months or 10 years? Didn't that last gas/diesel spike above $4 (or double digits in the EU) in part cripple the economy enough, or should manufacturing wait until the tidal wave is withing sight of land fall. Public rail transportation, Hybrids & EV's BUILT RIGHT HERE, should have been part & parcel with our economy over a decade ago, but for corporate short sightedness. Even now, GM continues its peril ... building overseas. Building what. Hybrids? EV's? Rail? NO. Maybe Buicks? Thanks.

 

You asked for the numbers. If they are meaningless why did you ask. The link I provided has 2009 and 2008 numbers with percent change. Take a look if you want. The numbers are generally down but not down as much as the industry as a whole.

The Traverse is a runaway sales hit. The GM sold 2858 Trailblazers April-2008. They sold 8204 Traveses in April 2009. Not bad for a land barge especially when the vehicle it replaces is still on sale at fire-sale prices.

April may represent 1/2 a month of 2010 Prius sales but the 2009 model has been on sale for the entire month. You seem to think that the term niche is an insult. It isn't, it is simply the truth. Hybrids are a very small percentage of total sales. Hybrid sales are increasing but they are far from mainstream. The price of gasoline will determine how long it takes for hybrid to become mainstream.

 

Hybrids are a niche market.

Replace "hybrid" with "small car", "compact", or "subcompact" and it's the 1970's all over again. Those who ignore "niche" markets have nothing to sell when the niche turns mainstream. A much smaller GM may do very well by concentrating on the Corvette, van, SUV, & light truck niche markets.

 

Don't try to confuse Hill et al with the facts, the Prius is mainstream and pickup trucks are a niche market. This is the reason Toyota built a plant for the Tundra and the Prius is imported. Incredible logic.

 

GM builds what overseas? GM has always had a policy of trying to build vehicles in the market it sells and NOT a policy like your beloved Toyota of building twice is many vehicles in the motherland and shipping them to the largest market. Public rail? Who until recently was the largest maker of locomotives in the US? Who builds hybrid buses? do you get all your information from Michael Moore?

 

Well, I DID finally see one whole oversized GM hybrid on the road the other day. Now THAT's a niche market. And pretty much, that's a good way to look at whether a market is niche ... are there only a handfull? and which way are their sales headed.