GM riding on China growth to defy bankruptcy

Shanghai, April 16 (Gasgoo.com) On the verge of bankruptcy in its home U.S. market, General Motors expects to be riding on further growth in China. GM plans to boost its investment and capacity in China to maintain its auto sales leadership in this booming market, doubling its annual sales to 2 million cars in five years.

Through its two Chinese ventures Shanghai GM and SAIC-GM-Wuling Auto (SGMW), GM sold up to 1.09 million cars in China last year. Its China sales in March this year rose 24.6% from a year earlier to 137,004 vehicles, setting a company record for monthly sales. In the first three months, GM China sales grew 16.8% y/y to 363,701 units. GM attributed the strong sales growth to new product offerings.

GM China president and general manager Kevin E Wale has declared that the company's sound profit-making ability and adequate cash flow will guarantee its continuous development in China's auto industry. Mr. Wale assured that even if the worst were to occur -- by which he may mean the bankruptcy -- GM's Chinese joint ventures would still be able to continue to get the GM technical and product support.

Over the next two years, Buick and Chevrolet, the two GM brands managed by GM and its Chinese ventures, will each launch at least five new car models. The U.S. auto giant has decided to launch over 30 new or upgraded car models of all its brands in China in the next five years to double its annual China sales to 2 million vehicles during that period.

To reach the 2-million-car sales target by 2013, GM needs to develop a larger production capacity. "We're pretty well-placed to do a lot of growth at the moment without having to spend a lot of money," Kevin Wale, head of GM China Group, said in an interview. "We would probably need at most one new facility to get to two million units."

In early January this year, GM signed a deal with another Chinese auto giant FAW Group to jointly produce light commercial vehicles. The Harbin Light Vehicle Plant, in northeastern China's Heilongjiang province, will be the production base for the FAW-GM light commercial vehicle project. This move is seen another big step by GM in its expansion in China.

GM in December opened a new passenger-vehicle plant in the northeastern Chinese city of Shenyang. That plant, the fifth one that GM runs with main Chinese joint-venture partner SAIC Motor, has begun increasing production of the Chevrolet Cruze, the first compact sedan for the Chevy franchise in China. The new car should arrive in dealer showrooms by mid-2009. 

Even it is preparing for possible bankruptcy in the U.S., GM sees its market in China continuing to be strong, said Ray Young, vice president and chief financial officer (CFO) of GM. He expressed confidence in the growth of China's auto market, adding that 2009 will be a year of high growth for the Chinese auto sector as well as GM.