GM repatriating Chinese profits - it may do more harm than good. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.
Bob Lutz, GM's vice-chairman, said GM is preparing to move profits from Chinese operations back home to the U.S., where cash is needed badly to make up for North American losses. The ho-hum Hummer brand, which GM put on the chopping block, didn't get any rapid eye movement yet. So pulling profits from China is one of the few options left for GM.
Draining the huge, vibrant and growing China market of funds while the rest of the world tanks doesn't sound like such a good idea, but these are desperate times. "We do not rule out such a possibility under current conditions," Lutz said. (Translation: We are already preparing the transfer.)
GM had been doing really well in China since they started producing vehicles here in 1999. This has changed. The Volkswagen Group again is China's market leader in passenger vehicles. GM is also being outsold by Toyota in passenger vehicles. The gap may widen if Detroit pulls out marketing and development funds from China.
Defending his budget, General Motors Corp. Asia Pacific President Nick Reilly warned that the company's vehicle sales in China fell in August and September from a year earlier. He also isn't so sure about GM's previous forecast of 11% to 12% overall sales growth in the Chinese auto market for 2008. "The market is too unpredictable to forecast with any credibility," said Reilly, ostensibly blaming the market while in reality talking to Detroit.
The move will not be popular with GM's joint venture partners, especially when cash is king and credit is an endangered species.
General Motors has several JVs in China through mergers of local companies jointly held with the Shanghai Automotive Industry Corp (SAIC) - one of China's top three automakers. SAIC is also an important JV partner of Volkswagen, and if the money flows back to Detroit, SAIC may like the Germans even better. Volkswagen doesn't need the money. Like a second coming of the Wirtschaftswunder, the VW shares defy gravity and financial malaise while the rest of the world is going to the toilet. - 15224
Bob Lutz, GM's vice-chairman, said GM is preparing to move profits from Chinese operations back home to the U.S., where cash is needed badly to make up for North American losses. The ho-hum Hummer brand, which GM put on the chopping block, didn't get any rapid eye movement yet. So pulling profits from China is one of the few options left for GM.
Draining the huge, vibrant and growing China market of funds while the rest of the world tanks doesn't sound like such a good idea, but these are desperate times. "We do not rule out such a possibility under current conditions," Lutz said. (Translation: We are already preparing the transfer.)
GM had been doing really well in China since they started producing vehicles here in 1999. This has changed. The Volkswagen Group again is China's market leader in passenger vehicles. GM is also being outsold by Toyota in passenger vehicles. The gap may widen if Detroit pulls out marketing and development funds from China.
Defending his budget, General Motors Corp. Asia Pacific President Nick Reilly warned that the company's vehicle sales in China fell in August and September from a year earlier. He also isn't so sure about GM's previous forecast of 11% to 12% overall sales growth in the Chinese auto market for 2008. "The market is too unpredictable to forecast with any credibility," said Reilly, ostensibly blaming the market while in reality talking to Detroit.
The move will not be popular with GM's joint venture partners, especially when cash is king and credit is an endangered species.
General Motors has several JVs in China through mergers of local companies jointly held with the Shanghai Automotive Industry Corp (SAIC) - one of China's top three automakers. SAIC is also an important JV partner of Volkswagen, and if the money flows back to Detroit, SAIC may like the Germans even better. Volkswagen doesn't need the money. Like a second coming of the Wirtschaftswunder, the VW shares defy gravity and financial malaise while the rest of the world is going to the toilet. - 15224
About the Author:
About the author: After having worked as a Marketing Consultant for Volkswagen AG for three decades, Bertel Schmitt changed sides in 2005 to found Hongkong, Beijing, and Hamburg based Sinamotive, a company specialized in sourcing low cost high quality auto parts in China. The company supplies many European wholesalers. Schmitt also is author of a blog about the Chinese auto industry.
