China car makers go west as rivals stumble

Ford Motor Co. named the parent company of China's Geely Automobile Holdings as the preferred bidder for its Volvo car unit this week, paving the way for China's second possible acquisition of a major overseas automaker this year.

A dozen China-centred auto deals have been proposed this year, underlining the growing international clout of the world's largest and strongest car market.

Here are some questions and answers about how the shake-up in the global car market is playing out, and where it may be leading the auto industry.

LET ME GUESS: ALL ROADS LEAD TO CHINA?

The sole bright spot for automakers reeling from the demand-withering global financial crisis, high fuel prices and pressure to up fuel efficiency, China powered past the U.S. to become the world's largest car market earlier this year.

While industry-wide U.S. auto sales slipped 27 percent this year to levels last seen in the early 1980s, China's car sales are on track for a record year. September sales surged 84 percent from a year earlier.

The recession-led sales slump that drove U.S auto factory closures and job losses in the traditional car making heartland of Detroit saw General Motors and Chrysler -- two of its 'Big Three' automakers along with Ford Motor Co -- file for bankruptcy.

HAVEN'T STATE SUBSIDIES HELPED?

Results have been mixed.

Less than six months after the U.S. government extended an emergency $17.4 billion lifeline to the industry in December 2008, as part of the $700 billion Troubled Asset Relief Program (TARP), Chrysler went bust in April, and GM in June.

The summertime 'Cash for Clunkers' program, which offered credits of up to $4,500 on new cars purchased by consumers trading in older, less fuel-efficient cars, totted up nearly 700,000 sales, and around $2.87 billion in rebates.

Japanese and Korean carmakers emerged as main beneficiaries: Toyota Corolla was the top-selling model, with South Korea's Hyundai and Nissan the next most popular brands. Ford was the only U.S. manufacturer with top-selling models in the program.

In Japan, the world's third largest car market, demand fell so flat that government stimulus could not prevent shrinking sales that only broke a 13-month decline in September with a modest 0.2 percent rise.

While state incentives helped European carmakers stage a fragile recovery since June after a 14-month slump, the end to state subsidies now hangs over the market.