GM and the Folly of Long-Term Plans in China

General Motors (NYSE: GM) management says it will double sales in China by 2015, according to several media reports. GM executives should know better. It would be better to underpromise and overdeliver, a maxim that has not made its way into the senior management suites. Their claim will cost the company some of its reputation with investors.

GM is, along with Volkswagen, the largest car manufacturer in the People’s Republic. China passed the U.S. two years as the world’s largest market for car and light trucks sales. That has made the country the most important target for powerful foreign car companies like Ford (NYSE: F), Toyota (NYSE: TM), Honda (NYSE: HMC) and several luxury car firms such as Mercedes and BWM. But several local car manufacturers have no intention to allow overseas companies rule their market.

The Chinese car market will become more difficult for manufacturers in the next several years. Tax incentives, offered by the central government to buyers, have expired and there is no sign those will be renewed. Economists fear that a global recession eventually will wound China’s economy. If so, China’s middle class will not grow as rapidly as its has recently. Wages of those who work in factories are likely to plateau.

GM’s prediction means that it will need to outpace rivals from the U.S. and EU in sales of car and light truck models in China. There is no reason to think that will happen. So there is no reason for GM management to make such a claim.

Douglas A. McIntyre