Without China, GM (GM) Is Nothing

GM (GM) does well in China, but based on the company’s dire situation in North America, it is going to have to do a lot better in the world’s most populated country and other very large emerging markets.

According to The Telegraph, the head of GM’s Asian operations said "that growth seen in emerging markets is not a short-term phenomenon but "is likely to last 10-20 years at least".

For GM, that growth needs to be robust now and GM needs to get a very large piece of it. Ten million cars will be sold in China this year. In three years, it should pass the US, where 14 million to 15 million vehicles will be sold in 2008.

GM’s problems with competition maybe more acute in China than they are in the US. The traditional European and Asian car companies, especially VW and Toyota (TM) already have significant manufacturing and marketing operations in China. VW leads all car company’s in China market share.

The largest native car companies on the mainland have joint ventures with foreign firms like GM to help them with product design and manufacturing operations. These locals are beginning to take what they have learned and are striking out on their own. They are evolving from partners to competitors.

If GM is going to expand its part of the car market in China, it will need to add more manufacturing and marketing money. Capital in not plentiful at GM, but it has to risk the cash or lose the market.

Douglas A. McIntyre