GM is Booming (But Only in China)
GM is Booming (But Only in China)
About: (Ed Whitacre Jr, China Stock Digest, GM, General Motors )
Anyone who follows business news knows by now that GM has thrown its latest CEO overboard. CEO Fritz Henderson and GM parted ways on Tuesday, the board upset that the auto maker’s turnaround wasn’t moving more swiftly and Henderson frustrated with second-guessing form the board and possibly from government bailout managers.
The new (temporary) CEO, Board Chairman Ed Whitacre Jr, will take over as CEO while a global search is conducted. He stunned no one with his comment that GM will have to start making money soon.
Well, GM might look to China’s capitalists and consumers for answers. Sales of the company’s products are through the roof. GM hit a new record in November as its sales in China accelerated 109.5 percent to 177,399 vehicles. For the first 11 months of the year, United States-based GM and its Chinese joint ventures sold a total of 1,636,799 vehicles, up 64 percent for the year.
GM earlier said it plans to double its sales in China to 2 million units by 2015 and introduce more than 30 new or revamped models to widen its product portfolio. Analysts don’t expect the global management reshuffle in GM to impact the car maker’s strategy and sales in China. In the US, GM’s line of models is shrinking.
Meanwhile, Geely, the Chinese carmaker picked as the preferred bidder for Ford Motor’s Volvo unit, is seeking at least US$1 billion in loans from Chinese banks to finance its US$1.8 billion bid for Volvo.
Ford is also racing ahead in China. The company’s total sales in the first 11 months rose 47 percent to 210,982 units. Sales of Ford-brand vehicles accelerated by 152 percent to 22,738 units in November.
Although the China Stock Digest has been very cautious about investments in China’s fragmented and cutthroat auto industry, we follow macro-trends for a sense of consumer sentiment and industrial vigor. China’s auto industry has been boosted by a tax credit for small-engine vehicles but trends show strong consumer appetites in all segments including the luxury sector.
The auto consulting firm Global Insight in Shanghai says China will overtake the United States as the biggest auto market this year. Of course that is just a formality now. The statistics in our records show China is already number one in this bedrock U.S. industry.
The message about the economic health of China and its significance as an investment destination is plain for our subscribers to see.
