China is transitioning rapidly from developing to developed status. There is a more discretionary income than emerging third world countries.
The GM success in the Chinese market is with cars that were designed by Korean Daewoo.
Herein lies the problem, in order to compete they have to layoff in the US and outsource to low cost regions.
How is that good for American GM workers? Maybe good for the stock holders. But does the stock holder care if he made money with GM or with Baidu ?
The US auto companies are clearly late to the party in India, South America and Southeast Asia.
In US, it costs GM $2000 to $2500 per car for health care, retirement and UAW.
This is clearly unsustainable in developing markets where lowest cost cars are shooting for under $4000 and we are can see the writing on the wall. The cycle will renew when the Chinese must outsource to Nigeria to stay competitive.
GM, on the brink of bankruptcy, will require continued cost cutting and mergers/partners like Daewoo. The domestic market is flat and they're going have to reckon with production overcapacity issues.
The recent move by Chrysler to form a partnership with Chery to build small cars is really a bid for their own survival in the low end market.
This is gut-wrenching for folks in the industry and I am not marginalizing the impact.
But it will be Chrysler's job to make sure the cars meet our safety standards which means the design will be upgraded, accelerating Chery's learning curve in the US market. Everything is moving faster now.
The displaced UAW workers may vent their frustrations by smashing those cars like they did the Japanese cars last go around. Maybe people will smash Countrywide and Coldwell realtor offices for getting us in the pickle on the subprime credit mess as well.
Some may then argue a Chrysler made in a factory an ocean away is not really a Chrysler.
This is the morphing strategy for survival of the corporation entities, not necessarily that of the employees' careers.
I suppose we can boycott it or even enact legislation to fight it, but the world markets will just move forward.
US automakers are facing a tough time, I am glad I ridded my auto stocks.
We as a country have been on a borrow and spend binge party for years now.
From every level from Uncle Sam to Wall Street to your neighbors, borrow and spend is the game.
Who has been financing a big part of it? We buy their goods and the Chinese send our dollars back and lend it back in the form of treasuries.
It wasn't a problem when our houses were making us rich on paper, no?
Some of what we buy from the Chinese is things we don't need. But a lot are things that we need and it has kept inflation low for a long time.
Could we get $399 pc's with lcd monitors and printers if made in USA or W. Europe?
How much would the plasma TV or CD player cost or even your kids shoes cost if not made in China?
There was a saying in corporate procurement circles, "The China price", which mean the lowest price by which you can pressure your suppliers to match.
So the home equity is going up in smoke and stock market is shaky, we don't feel rich anymore.
If I lived foolishly and made reckless bets at Vegas, should I blame you for letting me.