Ailing at home, GM leads chase for Chinese car buyers

Driving a red Chevy, "Prison Break" star Wentworth Miller swerves and smashes through a maze of mirrors as men in black chase him in General Motors' latest Chinese television campaign.

As the feds turn up the heat on the auto giant in Detroit with bankruptcy seeming increasingly inescapable, half a world away GM is playing it cool in China where it broke the latest in series of monthly sales records last month.

"I don't think it makes much difference to us. Obviously we'd prefer to have this restructuring done outside the courts," Kevin Wale, GM China's president and managing director told AFP in a recent interview.

"We operate as independent joint ventures here in China so we would continue pretty much as we are today."

While GM pares back at home, it may add a plant in China to meet its goal of doubling annual sales to two million within five years with products developed for "the most important growth market in the world", Wale said.

As China led the world in auto sales in April, GM China's joint ventures' sales rose 29.9 percent on year to 151,084 vehicles, driven by demand for Buicks and small Wuling "bread vans" that cost less than 5,000 dollars.

"It's definitely one of the market leaders here -- in drastic contrast to their performance in the US," Shen Jun, an auto analyst at Roland Berger.

Mirrors like those in the television commercial surround a red Chevrolet Cruze, a fuel-efficient compact launched last month, in Shanghai GM's 2,800-square-metre (30,000-square-foot) flagship showroom.

Rather than crashing through the mirrors, showroom visitors gaze at reflections of themselves behind the wheel -- the half dozen visitors are all first-time buyers.

GM's first Shanghai sales office opened in 1929, boasting "Buick owners are mostly the leading men in China." Indeed, Pu Yi, the last emperor, revolutionary leader Sun Yat-sen and premier Zhou Enlai all owned Buicks.

But that history is barely known, allowing GM to recast Buick as a car for China's young and fast-growing middle class.

"Volkswagen has good prices and good quality, but their cars look very average, not unique," Li Pengxiang, a 29-year-old telecoms project manager said, comparing China's number two carmaker to the showroom's offerings.

"These new models look fresh and suit young people."

Savvy moves such as hiring Miller -- a superstar in China despite his show never airing here legally -- or introducing the Chevrolet Sail, China's first family car to sell for 100,000 yuan (14,650 dollar), has earned Shanghai GM a reputation as the Chinese industry's most sophisticated marketers, Shen said.

"They think they are doing much better than the parent company in the US," he said.

GM's success in China boils down to smart decisions, timing and luck that has put it far ahead of US rivals Ford and Chrysler, Shen said.

GM teamed with China's largest automaker Shanghai Automotive Industry Group or SAIC, in 1997 -- foreign car makers need local joint venture partners -- after SAIC rejected Toyota and before Ford could sign a deal, Shen said.

Tension in joint ventures is common, but GM and SAIC are known to have the best chemistry, Shanghai Information Centre auto analyst Zhu Junyi said.

GM spends heavily on research and development while delegating key responsibilities to its partner, he said.

"German and Japanese investors are more reluctant to give away any leadership role," Zhu said. "GM has done a better job with localisation."

GM's growing sales are impressive but competitors are growing faster -- Hyundai shot up 74 percent on year last month while Nissan sales grew 55 percent, Shen said.

Even as the Chinese market's growth slows -- to eight percent in 2008 after years of double digit growth -- more players are piling in.

"The Japanese automakers are steamrolling China's auto market," Eric Xu, head of Timer-Auto Consulting in Shanghai said.

In China, GM now finds those fierce Japanese rivals in hot pursuit and gaining fast.