Gasgoo.com (Shanghai June 20) - Great Wall has once again come under controversy as rumors that is has made a major staff cut reappear once more in the media. According to a report appearing in the China Youth Daily today, reports have appeared that Great Wall has announced that it would lay off 20,000 workers as part of an internal restructuring program brought on by the delayed launch of the Haval H8, which has caused the manufacturer's sales to fall and its production costs to soar.
According to statistics released by the China Association of Automobile Manufacturers, Great Wall sold a total of 52,000 vehicles in May, down 12.5 percent from April and 15.7 percent from the previous May. Its cumulative sales total for the first five months of the year was 299,000 vehicles, down 3.2 percent from figures reported a year ago. A sharp discrepancy is also evident between its different segments. The manufacturer's SUV sales in May totaled 35,994 units, representing year-on-year growth of 12 percent; a total of 189,442 Great Wall SUVs were sold over the first five months of the year, up 22.35 percent compared with figures from a year ago. By comparison, its sedan sales for May and the five month period from January to May respectively totaled 4,643 units and 17,530 units; the two figures represent year-on-year declines of 73.5 percent and 45.6 percent, respectively. Sales of its key sedan models, the C30 and C50, fell 68.6 percent and 77.5 percent, respectively.
The massive drop in its sedan sales can be partly attributed to increasing competition in the sedan market, especially among subcompact manufacturers. As more and more joint venture models enter the segment, own brand manufacturers are coming under a lot of pressure to offer competitive products, something which Great Wall was not really offering. At the same time, SUVs remain a promising avenue for Great Wall, which has focused in the segment for quite some time now, allowing it to devote even less resources to its sedan business. One example of this can be seen in the C30, which has still to be redesigned or replaced after several years on the market.
While in the past Great Wall has championed its balance between its SUV, pickup truck and subcompact sedan divisions, the appearance of only Haval SUVs at April's Beijing Auto Expo has led many analysts to believe that it is now shifting all of its attention to the SUV segment.
When asked about the staff cuts, an official from Great Wall stated that the reports were "definitely untrue", adding that it recruited over 9,000 new employees in this year alone. However when asked if the manufacturer has any staff reduction plans for the future, the official refused to give a direct answer, instead making the following statement: "Finding talent is an important part of Great Wall's strategic development. As far as I know, Great Wall is currently working on expanding its staff of capable and talented individuals for its R&D team, production managerial staff and assembly line workers. In addition to promoting development of domestic and foreign technological workers, [the manufacturer] is using training to boost the professional skills and comprehensive abilities of its staff teams, as well as attracting talented new graduates to work at its assembly lines in order to satisfy the operation demands of its Xushui, Baoding, Tianjin and other factories."
Will Great Wall abandon the sedan business? According to a source close to Great Wall, production capacity of the Great Wall C50 sedan has been shifted to the Haval H6 SUV to ensure that it meets market demand and sales growth requirements. A Great Wall-invited quality control specialist further revealed that CEO Wei Jianjun is entirely focused on ensuring the quality of the Haval H8, and has even expressed the possibility of the manufacturer quitting the sedan business.
The above Great Wall official rebutted the allegations, saying that the reports were "unwarranted". Another official from the company offered an explanation: "[Although] Great Wall's current development focus is the Haval brand, it definitely does not mean that is abandoning sedans. The current strategy for its sedan business is one of maintenance, so there will not be any large-scale investment in sedans for the next two years."
Many analysts have pointed out the dangers for a manufacturer to exclusively rely on the SUV segment. Even though growth rates in the domestic SUV market are very high, SUVs still make up only a small fraction of total automobile sales in the country; meanwhile, the subcompact segment still offers the greatest sales and development potentials in the country. At the same time, Great Wall has already made some respectable development achievements in the sedan market, and it would be a shame to let those go.
