In spite of what you see in the news about General Motors’ August sales being down 20 percent even with the Cash for Clunkers program, GM is poised to make a serious profit by setting itself up as a major automotive supplier for the Chinese market. The potential of that market is nothing short of impressive. I addressed this in my latest AIP column:
In spite of the Cash for Clunkers program, General Motors’ August sales still dropped 20 percent from August of last year. Obviously, no Cash for Clunkers program will solve the problems the company has with its American operations nor will it lift the company out of its North American sales slump. But there is a market in which GM is performing exceptionally well: China. While GM’s sales here in America have dropped dramatically, its sales in China have skyrocketed to new heights. GM’s Chinese July sales soared 78 percent, driven by its demand for Chinese-produced Buicks, a favorite among China’s upper-middle class, and Wuling micro-vans, both products of the Shanghai Automotive Industry Corp-GM-Wuling joint venture. SAIC-GM-Wuling has also announced it is planning to export commercial versions of its micro-van, the Wuling N200, under the Chevrolet brand to South America, Middle East, and North Africa, expanding its global presence even further.
Bolstered by its growing China sales, GM has invested $293 million in another joint venture, this time with China’s FAW Group Corp. This new joint venture gives GM a 50 percent stake in the new company and will focus on producing FAW-branded light-duty trucks and vans for the Chinese consumer market. Production will take place in two plants already in existence with a third to be built later. It is because of GM’s issues with its American market that the Chinese market is a perfect business fit. It can allow the company to make a profit once again, re-invent itself, and make it a significant player, not just in China’s expanding markets, but also in the Asian/North African market.
China’s expanding middle class is responsible for GM’s impressive China sales numbers. In 2005, the country’s middle class was comprised of 60 million people. It has already reached 80 million this year alone. China’s economy is growing so large and so quickly that by 2020 the middle class is expected to explode to 700 million people, more than twice the size of America’s entire population. Imagine a market of 700 million people with growing salaries and money to spend. This is a market other automotive manufacturers can only covet. That GM has positioned itself so effectively is nothing short of a life line that could allow it to relive its glory days, but this time as a real global competitor.
So why do the American taxpayers still own GM? It shouldn’t. With the plans GM has made in China in response to its massive up and coming middle class, combined with an intelligent operational draw down here in the US to meet the market’s realistic demands, GM will be more than capable of standing on its own. Then the company can pay back (with interest!) the billions of US taxpayer dollars that Barack Obama infused into it.
GM’s Buick is a favorite among the Chinese upper middle class, which is what saved the brand from elimination. If GM were really smart it would take advantage of China’s interest in the Buick and combine it with its growing interest in golf and move the Buick Open to one of the many beautiful golf courses over there. It could then pay Tiger Wood and YE Yang handsomely to play a kind of PGA Championship rematch in its first tournament. This would be one heck of a marketing coup. Not only would this encourage brand loyalty for GM in the Chinese market, but it would also allow the Chinese government to introduce its country’s golf courses to new tourism markets outside of Asia.
While you’re at AIP be sure to stop by and read the other columns and blog posts. Ed Morrissey has a very interesting piece on retail health care and finds, unsurprisingly, that it offers better service for less money than public health care. Rick Moran discusses the health care dilemma that everyone knows we have but no one wants to talk about: Medicare reform. Melissa Clouthier writes that the new “in” thing is being a political independent but finds that most of these new independents are nothing more than contrarians. Jim Hoft advises that we be wary of the bogus studies that undermine America’s health care system.