* * *
GM Pushes the Throttle in China Affiliate's Plan to Expand Into Cars Is Seen as a Key to Growth in Asia By JOHN D. STOLL Wall Street Journal APRIL 27, 2009
General Motors Corp. is intensifying its focus on China as it edges closer to a bankruptcy filing in the U.S. and other international units sputter.
The auto maker, until recently the world's biggest by output, has remained a relative powerhouse in China thanks to a pair of partnerships: a joint venture with Shanghai Automotive Industry Corp. and a minority interest in microminivan maker Liuzhou Wuling Motors Co.
GM Chief Financial Officer Ray Young last week said that Wuling will eventually begin developing its own brand of inexpensive passenger cars, representing a major step for a brand whose decades-old design primarily caters to Chinese farmers and other rural customers. Wuling's push into more consumer-oriented products also presents a considerable opportunity for GM, which so far has relied on its mainstream Chevrolet brand as its low-cost car division in emerging markets.
Mr. Young said that even without a legitimate passenger car, Wuling's sales have increased tenfold in recent years and now represent more than a half-million sales annually, or more than all of GM's other brands combined in China. Wuling has a contract to build small Chevrolet vehicles for the Chinese market.
Mr. Young also said the auto maker is looking to expand its GM China operations beyond the nation's borders in order to boost its presence in the entire Asian-Pacific region. GM Asia Pacific President Nick Reilly in an interview Saturday said Wuling's plan to build passenger cars, which hasn't been announced officially, could be the key to making this happen.
Shanghai Automotive also owns a stake in Wuling, and Mr. Reilly said the three-way venture could be how GM plays a leading role in the government's mandate for its indigenous auto companies to become players on the global scene. "We'd rather it be us than someone else," Mr. Reilly said.
Historically, in order for outsiders to penetrate the Chinese market, they had to enter a partnership with a Chinese company. This arrangement has led to better quality and technology for Chinese auto makers and an inside track into the country's rapidly growing market for non-Chinese auto companies, such as GM, Volkswagen AG and Toyota Motor Corp., Mr. Young said.
GM's Wuling affiliate makes microminivans, right, that primarily cater to rural customers. The company plans to move into inexpensive passenger cars.
Buzz concerning GM's China operations has faded in recent months as the auto maker has been forced to rely on $15.4 billion in U.S. loans and billions more from other governments. GM's once-thriving Daewoo Motor Sales Corp. operation in South Korea and its businesses in Russia and Latin America have fallen on hard times because of a global downturn.
Given the hardships of GM's other units and the rapid evolution of the Chinese auto industry, GM China is now considered to be among the company's most important ventures and one of the few units in the company that could survive the current economic crisis without major damage.
While other global operations struggle, GM China, in existence for little more than a decade, is growing. It is adding plant capacity, plans to increase its stake in Wuling from about a third to nearly a half and is seeking other partnerships. The company plans dozens of vehicle introductions over the next five years, and eventually aims to introduce a version of the Chevrolet Volt electric car in the country.
"To win globally, we must win in China," Mr. Young told a small audience at a Chinese business luncheon in Detroit last week.
China is expected to become the world's No. 1 vehicle producer this year, surpassing Japan. Mr. Young said he is starting to think China could outmuscle the U.S. this year as the No. 1 market for vehicle sales. GM had been predicting China would surpass the U.S. in 2015, but Chinese sales leapfrogged those in the U.S. in the first quarter.