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GMs Great Success Story: China

A visit to AutoChina 2010, the Beijing auto show, reveals a different side of the bankrupt automaker. In China, GM has gone from only 31,794 sales in 2000 to 1,826,424 sales in 2009. The bulk of those sales has come from Wuling, a brand of modest, Daewoo-engineered minivans and cars, but Buick and Chevrolet are the rising stars and are far from insignificant. GM is now the number-one producer and seller of cars in China, a role it used to enjoy in the United States, via its ten joint ventures and two wholly owned enterprises.

I was part of a U.S. media contingent that accompanied a group of Detroit-based Buick executives and PR personnel to Beijing, where we were able to meet the key players in GM's China operations and get a closer look at how Buick and Chevrolet have cemented GM's status as a major presence in this crucial, emerging market. I'd heard and read about GM's growth in Asia, and I was well aware that the company's strengths in the Asia-Pacific region played into the U.S. Automotive Task Force's decisions when it was ushering GM through bankruptcy last year. But it's still illuminating to come to the huge Beijing auto show, which will probably soon rival the Frankfurt and Detroit auto shows in importance, and see and hear about GM's success outside North America firsthand.

What kind of success are we talking about? Last year, China's auto market surpassed that of the United States for the first time, with 13,670,887 total sales. Of that, GM's 1.8 million sales represented 13.4%. Ten years ago, GM had only a 1.5% share of the Chinese market; in 2005, 11.2%. GM has had record sales in China for the past fifteen months and sold 235,351 units here in March alone (an annualized rate of 2.8 million). GM is more successful in China than Volkswagen, which is the Western automaker that has been here the longest, and it's far more successful in China than Toyota, the company that, ironically and painfully, usurped GM's role as America's sweetheart automaker.

But here in China, to Kevin Wale, the affable Australian who heads up GM's Shanghai-based operations, there is nowhere to go but up. "The central government is trying to increase consumption of cars in central China, in Tier 2 and Tier 3 cities," he explains. "More and more people will have the capability to buy cars. China still has only fifty cars per 1000 people. And the Chinese like cars," he emphasizes. "They want cars that demonstrate their personalities and lend them prestige."

GM is as well poised as anyone to capitalize on this burgeoning demand for personal mobility. It has eight manufacturing facilities across eastern China, from north to south, including two plants in Shanghai, one in Qingdao, and two in Shenyang. One of its most recent joint ventures, with China FAW Group Corp., spreads GM's reach to a facility in Qujing, in the remote southwestern part of the country, to build light commercial trucks.

Strangely enough, Wale, who has headed GM's China operations for five years, invokes the famous bromide from GM's longtime chairman, the man who created the ascending brand system (from Chevrolet to Cadillac), in describing GM's efforts to serve the Chinese population: "We do provide products for a wide spectrum [of customers] here in China. A car for every purse and purpose, as Alfred Sloan said." Indeed, Buick alone offers vehicles ranging in price from about $14,000 to as high as $87,000---that would be for a fully loaded Buick Enclave, which has to be imported from a factory in Lansing, Michigan.

Whereas in America GM served every purse and purpose through wholly owned yet decentralized divisions---Chevrolet, Pontiac, Oldsmobile, Saturn, Buick, GMC, and Cadillac---in China the automaker is playing its hand through a variety of joint ventures. No Western automaker goes it alone in China; it's imperative to have local partners for political, cultural, and logistical considerations. GM's most well-known and profitable partnership is GM Shanghai General Motors Co. Ltd. (Shanghai GM), a joint venture with Shanghai Automotive Industry Corp. Group (SAIC). GM holds a 49 percent stake. Shanghai GM was formed only thirteen years ago, in June 1997, to build, import, and sell Buicks, Chevrolets, and Cadillacs. In 2009, domestic sales rose 63.3 percent to 727,620 units. In the first three months of 2010, Shanghai GM sold 235,351 vehicles in China.

Cadillac took only a tiny slice of that 2009 pie, with 7265 sales, as compared with a whopping 447,011 Buicks and 332,774 Chevys, but GM does have a very Sloan-like view on how these three brands will continue to drive its growth in China. Chevy dealer outposts can be created cheaply and easily in the more remote regions of the country, driving GM's stake into the ground in areas that are just now getting people off of bicycles and into cars. Once Chevy is established and the population is becoming more affluent, GM can move in with Buick and, eventually, Cadillac. "Our vision here in China [for Cadillac] is much grander [than current sales]," says Tim Lee, GM's President of International Operations. Everything points to further organic growth in China, and we intend to be part of that. Most of our big competitors are just now catching up with our infrastructure in China. We are also very profitable in China, the Ohio native and 41-year GM veteran stresses. "Our formula: understand the market, support the brands, and execute carefully."