General Motors would lose a lot of the growth potential it currently has if it were to pull out of China amid the United States’ trade-row with the country.
Speaking to The Detroit Free Press, automotive market analyst Jon Gabrielson said that GM’s previous decision to back out of Europe means it is reliant on China to grow its business. If it did not have China, it would be operating mainly in North America, where the growth potential is tiny.
“The number one loss to GM, if forced to leave China, is the loss of all the future growth potential,” Gabrielson said. “Since they already sold off their European operations … GM would essentially be almost only a North American company.”
President Donald Trump suggested American companies cease their China operations due to the country’s unfair economic agreements with the United States in a tweet sent out last week.
“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon,” he tweeted out Friday.
While the majority of GM’s profits come from its North American business (in-part thanks to profit heavy products like its light duty pickups and full-size SUVs) it sells more vehicles in China. China’s Global Times Newspaper, a state-run publication, recently ran a headline that said ‘Quitting Chinese market will be suicide for US firms’ and highlighted the large amount of sales that GM does in the country.
“China is now the biggest market for some US-based enterprises, such as US automaker General Motors (GM),” the state-backed news agency said. “The automaker’s China sales came to 3.65 million cars in 2018, exceeding its total sales in the US market, where GM delivered nearly 3 million vehicles.”
There is some hand-wringing going on with regard to whether president Trump can force automakers to leave China, but experts agree that it’s unlikely GM would do so, as it has essentially positioned its entire business around being competitive in the world’s largest automotive market. Its money may come from the US, but much of the future growth it has touted to investors will be coming from China.
China imposed new import tariffs on US-made goods last week, including an additional 25 percent tariff on American-made vehicles, as its trade war with the United States heats up. The Alliance for Automobile Manufacturers, which lobbies on behalf of GM and other automakers that build vehicles in the US, said the new tariffs are “unfortunate for consumers and the entire auto sector.”
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Source: The Detroit Free Press
Comments
They not leaving China, too much money
Leaving European market was a big mistake. GM now depending only on US. a loosing China market. But recesion is near and American returns to small cars and GM concentrate to SUV and trucks. GM makes still the same wrong decisions.
You must not be paying attention to all those Trax, Equinox, Encore, Terrains that are sold. Those aren’t large SUV’s. Also, the Sonic and Malibu are still sold along with Buick and Cadillac cars. Most with 4-cylinder engines. This is very different than 2008 when most vehicles sold by GM had V6/V8 in them.
Someone here has to explain all this to me.
My small brain can not figure this out.
Here is what I can not understand ?
If all the talk on why GM cant compete in the US selling sedans, do the overwhelming product support by the competition.
And GM always says ” we are discontinuing sedan sales to focus on profit in the US ”
And GM always says ” why would we want more market share or volume, we make more money on higher transaction price ”
So again, if in the US we here GM can not sustain profits unless it cuts market share to focus on higher transaction price.
Why is this what they are doing in China ?
Again GM should just quit talking and start making competitive vehicles for a competitive price, and support them after the sale !!!!
All this talk is just that, —- talk —-.
Now opinion.
GM full and well intended on importing a lot of vehicles from China to the US.
GM invested O so much in China just to profit from the US market.
We cant get a segment leading interior on a GM truck, or a Cadillac better than a Chevrolet, do to the cost, but in China GM can spend unreal sums of money on a less profitable market.
This is just talk just like the C8 Corvette.
GM spends all that money developing a vehicle,
And its a great vehicle !!
But it won’t sell anywhere near the volumes of GM trucks or Cadillacs !!!!
Why cant spend it on the most profitable GM vehicles,
The Cadillac line,
And the truck line !!!
EGO, Arrogance,
In GMs eyes they still think they make the best.
Just like in years past, GM sits there with their chest puffed up ” we make the best this and that ” meanwhile the rest of the market is moving, creating, designing.
And then all the sudden ” ” ” ——-POW—–” ” ”
And GM just cant figure out what just happened !!
GM, there are a lot of sedans sold in the US, just not your sedans, do to the design, in and out, and do to you not supporting them after the sale !!!!
GM there are a lot of trucks sold in the US, but you are losing market share, do to the design, in and out, and once again, not supporting them after the sale !!!!
And I would think, just those two markets, in the USA, if you would focus as much time and money on as you have in china and self driving, there would be more profit per dollar spent.
In todays world.
But that is also a GM trouble that is attached to the same old thinking, ego, and arrogance.
You are always behind the curve in the market, why ?
Again, my opinion, the same reason you think you are doing a good job supporting your vehicles after the sale, is the same reason you cant keep up with the customer market curve.
The dealer !!!!!!!
If you rely on a GM dealer to give you any information other than what you want to here, you are fools, and I believe you are fools for just that.
It has been years, in the US since you could enter a GM dealership and talk to anyone who knows anything about a GM vehicle.
In sales or service !!
Anyone who was good at either just simply can make more money for their families doing the same thing for someone other than GM.
At the dealership level.
But the feedback from the dealership, always comes from the management team, who are managers, not sales or techs.
At GM it will continue to be blind leading the blind until GM figures out how to communicate with the customer !!!
Good luck waiting this out until 2021 with all that extra capital saved.
And you had better hope that the same white house is not there after, because I don’t think you, GM, can sell enough or fire enough, for enough capital to last 6 years.
So from this armchair CEO, maybe you, GM, should help now, this day, today, finally, all those people who still support you in the USA. The loyal customer filing a lawsuit, the loyal customer using a lemon law, the loyal customer with ” known faulty ” GM parts, the loyal GM employee, even at the dealer, the loyal GM tech who is trying to help you with your junk,
Instead of spending all that capital doing the same thing that always gets you into the same old troubles.
Just my opinion !!!
It all boils down to these three words: Piss Poor Management.
After the bankruptcy, GM should never have appointed a GM lifer as CEO, at least for a long while- let alone one that follows in the footsteps of Roger Smith.
You are right, GM is operating as if they are still number one globally. However Machete Mary and the Wrecking Crew are tracking to take GM down to the size of Honda or BMW. GM’s culture has been plagued by groupthink and bean counters for the last 40 years and that culture is not changing under Machete Mary. The GM way for most of this time has been led by these principles: when the product has issues cut it, don’t fix it; we will tell the customer what they will buy not build what they want; cost cutting is king from cheaper materials to not updating product in a timely manner vis a vis the competition; and lastly creating a culture of nonthinkers where all decision making power is held by one person and healthy dissent and debate is not allowed.
trump : “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing .your companies HOME and making your products in the USA,”
i wouldn’t call that a suggestion. but it seems increasingly, people are just ignoring him.
GM was the biggest automobile manufacturer in the world between 1931 and 2008… if they pull out of China, they will become too small to sustainably survive on their own. Korea is a mess, South-America barely break-even, Europe non-existent and North-America vulnerable due to potential economic instability (which in turn is due to heavy government debt).
This order to the US companies issued via Twitter to quit China had made me laugh. Trump is so far out of whack with reality, he lives in a dream world of a real estate tycoon.
I looked for sales statistics and found GM’s 2019-02-06 press release “GM Reports Another Strong Year of Earnings” especially its “Quarterly Sales Chart” download.
According to that statistic for the full year 2018, GM sold a total of 8,384,482 cars world wide, of these 3,645,044 units in China, and 3,490,114 in North America (i.e. the 3 NAFTA-Countries Canada, USA, Mexico), 3,673 in Europe, and 1,245,651 in the rest of the world — South America, West Asia, North Africa, Australasia, and some more assorted countries.
This GM press release did not specify how many of those cars sold in China are produced on location or imported, and how many of those of those produced in China are exported (is the Buick Envision still exported to the USA?).
In China, the joint ventures with GM participation compete with VW (Volkswagen) for the largest share of the market.
In order to pull out of China, GM would have to sell their share of the joint ventures to SAIC, pushin SAIC into the top group of world’s automobile manufacturers, and reducing GM to one of the middle sized ones.
Trump oviously thinks that he can push back China into a colonial situation, to the times when US-China relations was mainly symbolized by the Chinese coolies nailing the rails of the US railroads from the Atlantic to the Pacific. He must ignore that China operates not only the worlds largest network of high speed rail lines, but also a space station and a robot roving the back side of the moon, and that Chinese company Huawei is the leading manufacturer of network equipment.
He showed his lack of knowledge of the automobile industry when he complained that he can’t see any US automobiles on Europe’s roads while lots of Mercedes drive along New York’s Fifth Avenue. Trump ignores that US companies Ford and GM dominated long time the European automobile market, GM thru its subsidiary Opel/Vauxhall, and he ignores that a large part of those Mercedes he spots in front of his tower in New York are produced inside the USA, and that BMW and Mercedes are No. 1 and 2 respectively in automobile exports from the USA.
GM and their joint partners build and sell vehicles for the Chinese market, and only export one vehicle, the Buick Envision, back to the U.S.. Many Companies have invested in manufacturing in China, and sell and mainly serve that market.
While we do have a trade deficit with China, major U.S. Companies generate substantial sales and earnings within China, which do not show up in the trade figures. Many U.S. based jobs are created here , to support operations in China.
As we get closer to the 2020 election, Trump will need to have a trade deal with China to insure his re-election.
GM is just shadow of its glory. From industry no. 1 to relatively small company operating only on US. a China market. Its fall is still continuing. You can see it on every single new product with almost zero innovation (from new trucks to Cadillac portfolio) – just average quality vs rise of Kia/Hyundai duo.