Ford the Latest to Waiver on Chinese Growth

By Douglas A. McIntyre Published Feb 21, 6:35AM EST

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Chinese sales have been a backbone of General Motors’ (NYSE: GM) and Volkswagen’s earnings for several years. These firms have ridden their shares of the world’s largest car and light truck market to strong profit margins. All of the other global auto manufacturers have chased them on the assumption that market share in China is critical to financial success. Ford (NYSE: F), one of the companies that has played catch-up, admitted the value of the market in the People’s Republic may help it very little. One reason is Ford’s small share. The other is more ominous for all major car companies. The Chinese market is no longer growing much.

Ford’s management said the firm expects Chinese vehicle sales to rise “about 5%” in 2012, according to the Wall Street Journal. Most estimates are that the entire market in China may not increase much faster than that. And, if the economy slow down continues, the figure could be less.

Ford’s prediction means two things. It and rivals like Toyota (NYSE: TM), Honda (NYSE: HMC) and Nissan will not get most of whatever revenue improvement they might have this year and next from China. They will not get it from Europe or Japan either. Those economies are too weak to promote robust car sales improvements. That leaves the U.S. and South America as the remaining battle grounds. Each continues to show promise, but not nearly as much as was expect from China, based on forecasts just two years ago.

China has gone bust as a car market. Ford’s forecast is an early indicator of that. So is the slowdown in overall sales in China that began late last year. The world’s largest car companies will have to turn somewhere else to fuel rapid sales growth, and there are few other large places to turn.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.