SAIC to boost profitability by cutting expenses

Shanghai, February 3 (Gasgoo.com) SAIC Group, China's biggest carmaker, plans to squeeze out 1% net profit in 2009 by reducing costs of operation and cutting the pay of executives. The company will also integrate the own brands of its two subsidiaries to speed up the profit-making process of its own-brand vehicles, said xcinhuanet.com today.

Industry insiders said that SAIC Group has submitted its 2009 "work plan" to the State-owned Assets Supervision and Administration Commission of Shanghai, detailing its measures to squeeze out at least 1% net profit by cutting operational costs and top management paychecks. All its subsidiaries have been required to take the austere measures.

Reportedly, SAIC will lower expenses through moves including cost reduction of 1-3% for raw material and operation and pay cuts of at least 15% for executives. Chinese automakers are slowing production and paring expenses as nationwide vehicle sales are likely to grow at the slowest pace since 1998 this year.

SAIC Motor, which makes cars with General Motors Corp. and Volkswagen AG through joint ventures Shanghai GM and Shanghai VW, said last month that its 2008 profit probably fell more than 50%, hit partly by its investment in Korea's Ssangyong Motor, which has filed for bankruptcy protection.

In the meantime, the Chinese auto giant will integrate the own brands of its subsidiaries to speed up the profit-making process of its own-brand vehicles. Shanghai GM and Shanghai VW are both redoubling their efforts to develop and market their own-brand vehicle models.