GM (GM): Luck Runs Low In China

Up until recently there has been a horse race for who is the largest seller of cars in China. GM (GM) and VW traded places from quarter to quarter. Unfortunately for GM (GM), its prospects have fallen apart and it now sits in the No. 3 spot behind VW and Toyota (TM).

GM is being vexed by the same things that have hurt it in the US market. The Chinese do not like the quality or fuel efficiency of its cars. Its damaged reputation has made it into the world’s second-largest vehicle market.

According to The Wall Street Journal, "J.D. Power expects GM’s China sales of passenger vehicles may contract as much as 5.5% this year, its first decline since 1999."

It is old news that GM has bet much of its future on growing sales in places like China, India, and Russia. It is new news that it is not working. That puts GM at real risk of failure. With the vehicle markets in Europe and America shrinking, there are only a limited number of big countries where car companies can turn for growth.

GM will buy some time as the US government sets up loan guarantees for $25 billion to be used by American car companies to improve their plants to build more fuel-efficient cars. GM has also made a tremendous commitment to electric-powered automobiles. In short, the largest car company is the US is doing everything it can to secure its future.

If GM cannot sell cars in great enough numbers, none of its clever management actions can offset the results. If GM falls far enough behind in China, it has lost the global race.

Douglas A. McIntyre