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» China-Business-Articles » Reading: "Does the GM journey cover China?"
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| Does the GM journey cover China? |
By:
Tom Watkins |
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Does the GM journey cover China?
by Tom Watkins | for Michigan Business
There is an ancient Chinese saying: "A journey of a thousand miles began with a single step." General Motors recently entering bankruptcy has begun the first step in a long process to reinvent itself. Will this journey cross China?
What GM is attempting to do in bankruptcy is nothing short of launch a new company against a backdrop of ever-increasing global competition. GM is planning to emerge from bankruptcy a smaller, leaner, greener car company.
Ironically, China's economic stimulus initiatives, cutting taxes and encouraging consumer spending on 1.6 liter engine autos has spurred sales of GM's cars in China. It has taken U.S. lawmakers more than half a year to pass "cash-for-clunkers" legislation to help spur auto sales in America. China has been and will continue to be a major profit center for GM.
David E. Cole, chairman, Center for Automotive Research, says: "China is extremely important to GM and for every car maker in the future. Global manufacturing scale will be GM's savior. Volume will rule, and China offers volume."
The GM crisis provides opportunity to think differently. In this hyper-competitive, technologically-driven global economy, perhaps it isn't far-fetched to think the impossible.
Meanwhile, are there opportunities for additional U.S./China auto alliances in the future?
Chinese businesses are always on the prowl to extend their global reach. In mid-April, without much fanfare, Delphi Corp., itself in bankruptcy, announced the sale of its suspension and brakes businesses to China's newly founded Beijing West Industries Co. Ltd.
Tengzhong Heavy Industrial Machinery Co. Ltd. and GM are in discussions to sell Hummer to Tengzhong, a Sichuan, China-based heavy machinery company. GM said it expects the deal, if successful, to secure more than 3,000 US jobs.
Is it possible GM will sell one or more of its remaining auto brands to China? There may be benefits for both a Chinese business and GM alliance including:
• Creating an instant Chinese presence in the United States.
• Providing GM with much needed capital to help emerge from its mounting debt.
• Creating a distribution system through the existing GM dealerships slated to close, which would help struggling dealers and the communities where they operate.
• Adding an inexpensive low-end auto to the American mix of cars.
• Providing much-needed research and development and technology transfer to and from Chinese partners.
• Providing the expertise to the Chinese to navigate the costly and tough process of meeting safety and emissions standards in the U.S.
• Providing the technical and management expertise in existing China car companies about U.S. culture, government regulations and other nuances of the U.S. car business.
• In this competitive global auto market, the correct global partner could block a competitor from doing the same.
• The right alliance would create a bigger footprint in China's exploding global market where it is estimated that only 50 out of a thousand people currently own an auto.
• China has excess capital and is looking for global partners.
Stay tuned - there are many more steps GM must take in this long journey of recovery.
Tom Watkins is a business and education consultant in the U.S. and China. Read Watkins' recent China/Change blog at http://pod08.prospero.com/tomwatkins. |
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