GM Thriving in China Despite Bankruptcy

Mainland Sales Growing at 'Torrid' Pace With Record Sales in 2009

By Published on .

SHANGHAI ( -- What a difference an ocean makes.

General Motors, the largest automaker in the U.S., filed a bankruptcy petition in New York on June 1, marking the end of an era. GM was part of the fabric of America's auto industry and an icon going back decades. GM plans to close 11 U.S. factories and suspend operations at three others to cut costs, and eliminate around 21,000 jobs.

On the same day half a world away, executives at Shanghai General Motors, a joint venture between GM and Shanghai Automotive Industry Corporation (SAIC), normally would have been celebrating.

"We had a great May," said Steve Betz, general director for Shanghai GM's Chevrolet brand in China. "We sold 56,000 [cars in China last month]. It was the second-best month in our history."

Shanghai GM produces three passenger car brands in China--Buick, Cadillac and Chevrolet.

Advertising for Buick, which has a sportier image in China and appeals to 30-something executives, is handled by Bates Asia, while McCann Erickson oversees creative for the other two brands in China, the world's largest car market by monthly sales.

Chevrolet has become a popular mass-market brand, although Cadillac has struggled to pick up speed among affluent Chinese so far.

GM also manufactures mini-trucks, mini-vans and the Chevrolet Spark mini-car through SAIC-GM-Wuling Automobile, a joint venture between GM, SAIC and Wuling Automobile Co. In addition, GM distributes imported Opel and Saab cars in the mainland, where it has almost 25,000 employees.

From January to May 2009, GM and its joint ventures sold 671,148 vehicles in China, a 33.8% increase over the first five months of 2008. Shanghai GM's sales grew 12.0% on an annual basis to 228,487 units, while SAIC-GM-Wuling's sales rose 48.9% to 441,812 units.

GM executives in China have said they plan to double the company's domestic sales over the next five years. In 2008, GM's China sales hit 1.09 million units, about a 12% market share.

The bankruptcy proceedings in the U.S. will have "no real impact to Shanghai GM," Mr. Betz said. GM's joint ventures in China are not included in the bankruptcy filing.
Shanghai GM's Steve Betz
Shanghai GM's Steve Betz
"It will have minimal impact on our China JVs, which are separate business entities. GM will continue to support its JV's further development together with our partners in China," said Betty Tian, head of GM's communications department in China.

In the U.S., the auto company appears content to let its China executives continue to operate with minimal interference, not wanting to lose one of GM's most valuable assets.

During a news conference in New York on June 1, GM's president-CEO, Fritz Henderson, said GM's business in China "continues to grow at a very fast, I would dare say torrid pace, and we're very appreciative of that.

"The business itself is highly successful, with our partner SAIC, quite profitable, generates cash to be able to invest in the business, and that's exactly what we're doing. It remains a critical part of General Motors going forward."

"[GM} is better positioned than ever before thanks to sustained efforts in upgrading its product line, tapping the lower-end of the market and cultivating local research and development capacity," said Yang Jian, the managing editor of Automotive News China in Beijing. But future success isn't guaranteed.

GM faces fierce competition in China from other international car companies, especially Volkswagen Group and Japanese auto makers.

It also has one tremendous challenge, and that's learning how to minimize the impact of the U.S. bankruptcy on its China operations, Mr. Yang warned.

Investments in new products like the Chevrolet Cruze, which launched in April, have kept Shanghai GM on top in China
Investments in new products like the Chevrolet Cruze, which launched in April, have kept Shanghai GM on top in China

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