Autos

Waning China Car Sales Set to Ruin Ford and GM Results

Douglas A. McIntyre

The China Passenger Car Association announced that sales nationwide dropped 92% in the first 16 days of February. The decline is extraordinary because it has hit the world’s largest car market so hard that it will cause crises for Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM). The two manufacturers count on China for much of their worldwide vehicle sales and revenue.

Last year’s results from China were horrible for both companies. The February drop will make this much worse. In 2019, GM’s sales fell 15.1% to 3,093,604. Matt Tsien, GM executive vice president and president of GM China, explained his plans, which are already a wreck. Talking about 2019, he said, “During the downturn, we are focused on bolstering our product lineup and improving cost efficiency to position our company for strong performance in China over the long term.”

Ford’s problems were much worse last year. Ford and its joint ventures in China sold 567,854 vehicles. This was a retreat of 26.1%. Some analysts believe that Ford’s prospects will never recover in China. The market is simply too competitive and Ford is too far behind the leaders. Its operating loss in China last year was $771 million.

GM’s sales in China are bound to be down this year, in part because management said 2020 would be a challenge, and also because it will not recover from the first half of February. Ford’s situation is worse. Its operating losses in China this year probably will be close to $1 billion. Ford CEO Jim Hackett’s turnaround plans will be set back another year.

Ford and GM may have modestly good results in the United States this year, as they did in 2019. However, overall global results already have been hammered.