GM and China: What Are They Thinking?

Special to The Auto Channel
SeekingAlpha
by Tom Lindmark
May 14, 2009

Industrial production in China wasn’t up to snuff in April but GM has some plans to help boost the numbers.

The government released statistics today (treat all government statistics from China with some skepticism) that showed factory output rising 7.3% from last April, but that was less than the 8.3% growth recorded in March. Combined with the trade statistics, that showed a drop in exports of 22.6% in April and you have a country that’s growing much more slowly than in the past.

More to the point, the growth is probably due in great measure to the stimulus program of the government. This program is heavily oriented towards infrastructure. While these expenditures are going to represent a net long term positive for the economy, they are by nature temporary boosts to the economy.

China has to see demand from the West pick up in order to have any genuine economic recovery and that looks like it might be a long time in coming. Stimulating domestic demand is on their to-do list but that’s a long-term project. Think decades. Though they have growth, relatively speaking, China is no better off than its trading partners at this point in time. Their problem is that if the trading partners get better but don’t recover back to their old form then China could be in a world of hurt.

Meanwhile, GM, in an apparent move to help their Chinese friends, announced today that they would begin importing cars manufactured in China to the U.S. The stated purpose is to save on manufacturing costs. They plan to import about 17,000 in 2011 and think it will top out at around 53,000 in 2013.

It might not surprise you to learn that the UAW does not look favorably on this turn of events. You might also be sitting there and thinking about the same thing as I am. Specifically, the guys running this company must be dumber than a bag of hammers to announce something like this while they’re in the middle of trying to get the union to take haircuts and convince a Congress and administration that’s grandstanding about saving jobs to pony big bucks to keep them alive. Then again, they probably wouldn’t be in this position if they had brains to begin with.

If the government ends up owning 55% of GM does that mean that C-Span will be able to broadcast the monthly board meetings? If they do, I won’t miss an episode.