A new commercial titled “Chinese Motors” made by organization named “Let Freedom Ring” aims to portray General Motors in a negative spotlight as an un-American company that employs most of its workforce outside the United States while slamming the decision of the Obama administration for bailing out the automaker in 2009.
The ad starts with President Obama’s 2012 State of the Union address, in which the President states: “We bet on American workers. We bet on American ingenuity and tonight the American auto industry is back.” The ad then references a Forbes headline stating that almost two thirds of General Motors jobs are in other countries, followed by footage of a speech by CEO Dan Akerson where the chief states that seven out of ten GM vehicles were manufactured outside the United States.
The one minute-long commercial goes on to state that Akerson was appointed by President Obama and presents an excerpt from a CNN story stating that GM closed 13 U.S. plants while opening 15 new ones in China. Rounding out the clip is more footage of Akerson outlining a commitment to “working in China, with China, for China” — with the ad rhetorically questioning whether U.S. taxpayer dollars are working in favor of the U.S., or in favor of China. Underscoring some of those points are asides from two retired auto workers who question the actions:
The GM Authority Take
There’s an obvious political agenda here that we don’t feel the necessity to explore. However, we do feel obliged to point out that the ad takes an overly simplistic, if not foolish, perspective on the complexity and operations of a multinational organization such as General Motors.
For starters, GM is a global company that sells vehicles not just in the United States, but all over the world. In fact, Chevrolet — the automaker’s most popular brand by sales volume — sells more than 60 percent of its vehicles outside the United States — a statistic that truly underscores the global nature of the automaker. This reality doesn’t speak badly about the U.S.; rather, it demonstrates that GM’s products are desired by the world at large — in America, in China, and elsewhere, as well. As a business, wouldn’t GM be silly not to profitably meet the demand for its products in markets all over the world (and outside the U.S.).
To meet this demand profitably, it is often a prerequisite to build vehicles in and/or near their final point of sale. For instance, China — the world’s largest (by volume) market for automobiles — places hefty tariffs on imported vehicles. Failing to build vehicles for sale in China on Chinese soil can have disadvantageous effects on an automotive business. In fact, these negative effects are being experienced by Cadillac right now: except for for the China-specific Cadillac SLS, all Cadillacs are currently imported into China, and therefore face heavy tariffs by the Chinese government. These tariffs are then passed on to the Chinese consumer, resulting in a luxury vehicle offering that is priced too high, especially when compared to strong rivals (such as Audi) that build vehicles locally in China, thereby not being subject to the high import tariffs while carrying a lower price, which allows them to sell in higher volumes and earn Audi higher profits in the Land of the Red Dragon.
This is a problem that General Motors is in the process of addressing. The automaker is building a new plant in China in an effort to no longer subject its (Cadillac) vehicles to the high import tax set by the Chinese government. Building Cadillacs in China, for China will decrease the price of the luxury vehicles, putting them more in line with locally-built offerings (read: Audi), a move that will lead to an increase in Cadillac sales.
In summary, the story of Cadillac in China results in one new GM plant built in China — a move that is a simple reaction to increasing market demand and government sanctions imposed by the Chinese government on imported vehicles. This isn’t a move that supports China, or favors the country over the U.S.; instead, it’s a simple and natural response by a business (General Motors) that wishes to sell more vehicles and make more money in a market (China).
In addition, consider the fact that the U.S. auto market has stagnated in recent years, while the Chinese market — until recently — has been growing at an unstoppable pace. So why on earth would GM (again, a business run by sane business people) not want to meet demand of a growing market (China) and make more money?
Ultimately, the messages conveyed by the commercial, specifically regarding GM’s closing U.S. factories while opening new ones in China, is moot. Would American taxpayers rather GM not sell any Cadillacs (Chevys or Buicks) in China whatsoever? Would they rather GM not be able to meet Chinese-market demand for GM vehicles, thereby passing up revenues and profits? Doing either one of those would definitely not help anyone — not GM, not the U.S., and not the U.S. taxpayer.
At the end of the day, the Let Freedom Ring ad tries to spin facts that are simple realities of the business world at large against GM in ways that would only make sense to the uninformed. And it’s easy to see how a U.S. patriot without a keen understanding of global business would react to such a commercial, perhaps even electing to never buy vehicles from The General. The reality is that GM would simply not be a competitive business without serving global markets (such as China), and it can’t make all of its offerings in the U.S. thanks to a myriad issues such as cost structures, tariffs, and other complex factors.
Ironically, General Motors is the only automaker (American and foreign) to build a sub-compact vehicle in the U.S. But the commercial, in its infinite wisdom, doesn’t mention that. In fact, the ad reminds me of full-scale propaganda campaign… only this time, it’s an American lobbying organization doing its best to beat up an equally American automaker. The move will only hurt GM, hurt America, and hurt the U.S. taxpayers in the long run… because ultimately, the profits flow back to the U.S. — whether a GM car is built, and then subsequently sold in China, Europe, or elsewhere.
I’ll leave you with the following: would it be un-American and against the values of freedom and free commerce to limit GM’s ability to make money in China, or to criticize it taking advantage of the opportunity to do so?