GM power has shifted to China

Foreign operations report to Shanghai

Freep.com, by MARCIN SZCZEPANSKI AND TIM HIGGINS, FREE PRESS BUSINESS WRITERS

SHANGHAI -- Largely overlooked in last month's sweeping management reorganization of the new post-bankruptcy General Motors Co. was a recentering of power to Shanghai.

Nick Reilly went from overseeing GM's Asia operations based in Shanghai to overseeing all of the automaker's operations outside of North America, except for Opel -- ending decades of bureaucratic silos that had carved up the globe into regional divisions.

So while GM's Canada and Mexico operations report through the United States, most of the rest of the world reports through China.

"It should signal to everybody that certainly North America is going to be important to righting the ship, but basically the bread is going to be buttered out of Asia," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide. "GM fully understands that, and that's the reason why they put more decision-making capability out of Asia for their future fortunes."

As GM looks to sell off majority control of its Opel division in Europe, the Detroit automaker will likely draw on lessons from its China operations, where it is partnered with Shanghai Automotive Industry Corp. and Wuling Motors, for managing its new relationship.

GM is working with the German government in what's become an increasingly messy process to find a majority owner for Opel. Among the potential partners: Magna and a Russian bank or Belgium-based investment company RHJ International SA.

GM has learned much from its Chinese partners.

"We are familiar with operating in a shared ownership environment, which is quite different than what I call a 'command-and-control environment,' " Kevin Wale, president of GM China, told the Free Press during a recent interview. "You have to communicate very well. You have to understand that both sides of a partnership have to win all of the time."

That communication requires time.

"We often say that we make the same decision four or five times," Wale said. "But you have to do that to make sure everyone is lined up and that people aren't working against each other."

Shining jewel

While GM sales in the United States are down 37.7% to 1.1 million so far this year, its sales in China are growing at an astonishing rate.

GM's July sales in China through its joint ventures increased 77.7% to 144,593, which the company says makes it the best July ever in its books. For the first seven months of the year, GM's China sales were up 42.8% to 959,035, according to GM.

In early August, GM celebrated the sale of its 1 millionth vehicle in China this year -- a man named Ye Banjun purchased a silver Buick LaCrosse -- with a giant cake.

"Asia is the shining jewel that they have," George Magliano, an industry expert at IHS Global Insight, said of GM.

"If you look at GM going forward, they are a smaller company, they are more refocused. If they turn themselves around and they have resources ... to put behind things, it's going to be China and Asia."

Low-end stimulus

Some of GM's success in China this year, Wale said, is credited to the Chinese government's stimulus aimed at attracting lower-income, rural shoppers to new cars.

"The government has been very active in promoting low-end consumption of vehicles," he said.

This has helped GM's Wuling venture, which saw sales jump 90.7% to 87,925 in July compared with last year. That growth is driven largely by the Wuling Sunshine minivan.

GM recently announced a new deal with its Chinese partners to export Wuling mini-commercial vehicles from China to South America, the Middle East and North America.

GM also looks poised to enter into a venture with China FAW Group Corp., China's second-biggest automaker, to make light trucks, Bloomberg News reported last week.

"So far, China's growth has exceeded anything anybody thought possible," Mike DiGiovanni, GM's executive director of global market and industry analysis, said in July.

And for GM, said Magliano, Shanghai is "the crown jewel in the new empire."

Free Press business writer Jewel Gopwani contributed to this report.

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