Tag Archives: General Motors

GM To Expand Its Dealerships In China

Our man in Detroit tell us that General Motors intends to increase the number of dealerships it has across China to 4,200 from 3,800 by the end of this year. One in ten of those additional dealerships will be for Cadillac, taking the number of its dealerships to 200 from 160. Luxury marques are selling well.

Bob Socia, president of GM’s China operations, is aiming to get ahead of the growing demand for vehicles in what is now the world’s largest car market. Sales of cars and commercial vehicles are forecast to increase by 5%-8% this year, which could take the annual sales total beyond 21 million. Last year they rose 4.3% to 19.3 million vehicles even as economic growth slowed. That, though was a big improvement on 2011’s 2.5% growth in sales, hit hard by the removal of tax breaks for new-car purchases.

The biggest risk to the sales forecast for this year could be more legislation to thin traffic congestion and clean the air in big cities. Guangzhou, Beijing and Shanghai have all already done so. They may see their way to doing more on that front to, if anyone in Beijing can see anything right now. But other cities are expected to start following suit. GM’s dealership expansion could be to keep it ahead of that trend, too.

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GM’s Hummer Finds A New Owner In Sichuan

There was no way that a Chinese car company was going to be announced as the buyer of GM’s Hummer division. For one, an industry trying to build its future on some sort of green credentials could scarcely take on the poster child for American gas guzzling and automotive overextravagence; one highway, zero city, as  the TV cartoon show The Simpsons once described the Hummer’s fuel consumption rating.  For another, Chinese car companies had all passed on the division when GM’s bankers started shopping it around last year.

There is some sort of industrial logic to Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd buying Hummer, as it is now in talks with GM to do. The Chengdu-based engineering conpany would get a U.S. distribution network and the management to run it. It also gets a distribution network in regions where there is an attractive mix of wealth and lots of new infrastructure construction.

Though the Hummer has fallen from fashion in the U.S., it still finds a market in the blingier parts of Russia and the Middle East, and to a lesser extent  Africa, where a bit of armour plating doesn’t do much to the overall weight. There is a thriving grey market in the first two in particular, and which has even reached China (which the deal, if completed, will turn into a white market).

Tengzhong already makes construction machinery and special-use vehicles, like cement mixers and tipper trucks, to which the Hummer brand could be appended (replacing the Mercedes-reminiscent three pointed star badge). That would take Hummer back closer to its roots as an all-terrain vehicle, which it was for the U.S. Army before GM bought a licence in 1999 from AM General to turn the Army’s Humvee it into a monstrous (3,400 kilogram) $140,000 SUV for civilian road use. (The Humvee military business is not included in the deal with Tengzhong, as that is not GM’s to sell.)

Tengzhong’s roots as an engineeing company stretch back 40 years, but it has grown rapidly by acquisition since 2006 when it adopted its current name. GM valued Hummer at $500 million when it first put it on the block. No price for the sale has been announced (indeed final details are still being negotiated), but Tengzhong is likely to be paying  a lot less than that for its latest acquisition.

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Filed under China-U.S., Economy

China’s Stimulus Package Helps GM

This Bystander always takes heart from stories of windfall successes for globalization. Bloomberg is reporting how Beijing’s efforts to stimulate domestic demand and spread growth into the countryside is helping the troubled U.S. auto giant, General Motors.

GM increased its sales of the minivans it makes in China with SAIC by 32% in the first two months of this year. This follows a cut in sales taxes on small vehicles and the introduction of 5 billion yuan in subsidies to auto sales in rural areas. Farm households which buy a first new minivan or light truck can get up to a 5,000 yuan subsidy, those replacing an existing vehicle can get up to 3,000 yuan.

GM has now upped its sales growth forecast for China to 5%-10% for this year, from 3%, not enough to offset the shrinkage of its home market, of course, but sufficient to have some American car industry executives to suggest China’s direct subsidies to car buyers should be replicated in the U.S.

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