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China 'critical' to future growth of new GM, CEO says

By Michael Katz in New York and Li Fangfang in Beijing (China Daily)
Updated: 2009-06-03 10:53

General Motors' CEO Fritz Henderson said the Chinese market would play an important role in the success of the so-called "New GM" that is to emerge from its Chapter 11 bankruptcy restructuring.

"China remains a key part of our business," Henderson said at a press conference held at Monday noon (local time) in New York. "Our ventures in China are a critical part of the new GM - unequivocally. Our business in China continues to grow at a very past, even torrid pace and remains a critical part of GM going forward."

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Henderson also said the company had no plans to use its production facilities in China to sell cars in the US to build market share. "One of the bedrock principles has been to build where we sell," he said. "The same philosophy guides our business in China, where more than 99 percent of what we sell in China, we build in China."

On the day the company filed for bankruptcy in the US, GM's China unit announced that it did not expect to be affected by the restructuring.

"Our plants across China will operate normally," said Kevin Wale, president and managing director of GM China at a media briefing in Shanghai yesterday. "There will be no change in payments to employees, dealers or suppliers contracted to GM China or to our joint ventures."

As for the company's future, the auto giant's business strategy and growth targets in China will also remain unchanged.

"GM's China operations will be injected into the 'New GM', so there won't be any disruptions in our activities," said Wale. "GM has a specific development plan in China for the next five years that demonstrates our great confidence in the country."

Last month, while GM was still struggling for survival, Wale announced an ambitious target of doubling the domestic sales over the next five years to over 2 million units, with more than 30 new or upgraded models to be launched.

"We need a new factory within five years to meet the increasing market demand," Wale had said then, refusing to disclose details.

GM is also waiting for government approval to tie up with China's FAW Group for producing commercial vehicles in northeast China. The light-truck plant would be GM's third joint venture in China once the deal is approved.

One of the reasons GM China expects to stay the course, Wale said, was due to the strength of the Chinese auto market. According to GM, China has been the largest vehicle market in the world during the first five months of 2009.

"Domestic sales of vehicles by GM China and our joint ventures continue to be strong, rising 33.8 percent year on year in the first five months," Wale said. "We intend to remain an industry leader in China."

After GM China hit a monthly sales record in April, of 151,084 units, increasing 50 percent year-on-year, its market performance hit a new high in May with a 75.2 percent jump over last year, to 156,363 units.

Wale said that GM China might raise the target for 2009 in June if the sales remain robust.

In China, GM has eight joint ventures, two wholly owned foreign enterprises and more than 20,000 employees, according to the company. Products are sold under the Buick, Cadillac, Chevrolet, Opel, Saab and Wuling brands.

GM ended 2008 with a market share in China of 12.06 percent, and the company claims that it has been the sales leader among global automakers in China for three straight years.

The company said it expects the new, restructured GM to emerge in two to three months as a separate and independent entity from the current GM. It hopes to have a stronger balance sheet due to a significantly lower debt burden and operating costs.