Chinese imports could bring GM political troubles
As thousands of General Motors workers await word on more U.S. plant closures, reports that the company plans to import Chinese-made vehicles to the U.S. have created a political problem for the automaker and the White House.
The reports, which GM will neither confirm nor deny, could mean trouble because GM is supported by $15.4 billion in U.S. government loans, largely due to the Obama administration's desire to preserve the company's 90,000 U.S. jobs.
The United Auto Workers charged last week that the Detroit automaker intends to almost double over the next five years the number of vehicles it imports to the U.S. from Mexico, South Korea, China and Japan.
"GM should not be taking taxpayers' money simply to finance the outsourcing of jobs to other countries," Alan Reuther, the union's Washington lobbyist, wrote in a letter to U.S. lawmakers.
The carmaker, which was in danger of running out of cash early this year, faces a June 1 government deadline to cut costs and complete other restructuring measures or go into Chapter 11 bankruptcy protection. It also has requested another $11.6 billion in government loans to make it through this year, and faces the prospect that the government will soon be its largest shareholder.
On Wednesday, Shanghai Securities News and other Chinese media reported that GM plans to begin exporting vehicles from China to the U.S. within two years, ramping up sales to more than 50,000 by 2014.
GM spokesman Tom Wilkinson in Detroit would not comment on the reports. The White House and Treasury Department did not immediately respond to requests for comment.
"GM is reviewing various options," GM's China office said in a written statement received Thursday. "We are not discussing details of our future portfolio, beyond what we have disclosed in auto shows and our viability plans."
But the report reiterated the company's emphasis on first meeting demand in the Chinese domestic market.
"GM's philosophy has always been to build where we sell, and we continue to believe that is the best strategy for long-term success, both from a product development and business planning standpoint," it said.
Harley Shaiken, a professor at the University of California at Berkley who specializes in labor issues, said increased overseas production and imports could prove politically tricky for GM.
"The reason is simple — production location is a corporate decision, but when it's on the taxpayer dime, there are different sensitivities, so the notion of billions for a rescue package and offshore production, I think, could be politically combustible," he said.
Shaiken said GM needs to lower costs, which is accomplished with cheaper overseas labor. But it must also address concerns of the U.S. government, which wants to preserve American jobs.
"GM is getting funding from U.S. taxpayers to help save the company," Sen. Sherrod Brown, D-Ohio, said. "Taxpayers deserve more than Chinese imports in return. Taxpayer funds should be used to build the next generation of fuel-efficient vehicles in the U.S., not abroad. This is about creating jobs and rebuilding our economy."
GM, though, says the percentage of cars made and sold in the U.S. will remain stable.
Company documents show that American-made cars will comprise 67 percent of all vehicles sold in the country this year. The number drops slightly to 66 percent in GM's 2014 projections. Imports will amount to 33 percent this year, rising to 34 percent by 2014.
The company says the import mix could change by 2014, with fewer vehicles produced in Canada and more produced in Mexico and other countries.
"The percentage sold in the U.S. will stay constant within a percent or two," Wilkinson said. "The number of vehicles built in the U.S. will increase as the market recovers."
He reiterated that the company's goal is to build vehicles in the regions where they are sold, in part to avoid getting stung by currency fluctuations. GM, he said, builds 90 percent of vehicles sold in the U.S. in North America, and that is not expected to change.
Of the 3 million vehicles GM sold in the U.S. last year, it imported the Chevrolet Aveo and Pontiac G3 subcompacts from South Korea, the Pontiac G8 muscle car from Australia and the Saturn Astra compact from Belgium. The Saturn Vue, Chevrolet HHR small sport utility vehicles and several pickup truck models were imported from Mexico. Full-size pickup trucks, several sedans and small SUVs and the Chevrolet Camaro were brought in from Canada.
Still, the UAW generally opposes importing vehicles into the U.S. According to its figures, the percentage of GM's U.S. sales from Mexico, South Korea, Japan and China will increase from 15.5 percent now to 23.5 percent in 2014.
Reuther wrote that GM's increased imports would be equal to the output of four U.S. assembly plants, "the same number that GM plans to close."
The union currently is negotiating with GM for government-demanded labor cost cuts, including 16 plant closures. At a leadership meeting in Cleveland Wednesday, leaders were told to expect a vote on concessions before the June 1 deadline.
GM millwright Ron Bear of Belleville, Mich., who attended the meeting, said the rank-and-file would be unhappy with any more imports.
"As far as importing cars, what is that going to do for our jobs? I guess that's the question," he said.
GM would be the first company to import cars from China although automakers have brought in components in the past to save on labor costs. Most Chinese automakers have been daunted by meeting U.S. safety standards. They also face the uphill battle of winning consumer confidence for unfamiliar brands.
According to Chinese media reports, the primary exports to the U.S. would be small cars similar to the Chevrolet Spark subcompact.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, says it makes good business sense for GM to import subcompacts from China because the U.S. market for them is uncertain, but there is strong demand in China.
With gas prices around $2 per gallon most Americans will keep driving bigger cars. U.S. sales would be too small to justify the expense of building and equipping an assembly plant, he said. At the same time, exports to the U.S. would allow GM to keep its Chinese plants running at maximum capacity, which is the formula to make money, he said.
"In the short term, you're going to locate your plants where the core of the market is for that product," he said.
Cole suggested that for Obama, returning the company to viability would outweigh the drawbacks of importing some cars.
"What's more important, some jobs in a particular factory somewhere or the overall success of the company?" Cole asked. "That is really far more important."
May 15, 2009 at 10:43 a.m.
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I'd rather drive my American manufactured Honda then buy a foreign made American brand vehicle. At least the wages to make my vehicle were paid to Americans. Biggest Problem with the Buy American mantra is not all American brands are made by Americans and not all foreign brands are made overseas.
May 15, 2009 at 9:14 a.m.
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zoom:
this is the lead editorial in the herald (rock city, south carolina):
"WASHINGTON — The terms and conditions President Barack Obama imposed on Thursday's rescue of Chrysler inextricably binds the fortunes of the storied carmaker to the fate of Obama's young presidency.
Obama brokered the deal in which the Italian carmaker Fiat would take an ownership stake in Chrysler once the Detroit giant emerges from the bankruptcy protection it filed for Thursday.
Obama also is requiring that the new Chrysler-Fiat partnership manufacture more, smaller fuel-efficient vehicles in exchange for more than $10 billion in U.S. and Canadian aid."
and here is what bloomberg.com said about the obama/gm deal:
The deal is nothing short of a political rip-off, with the Obama administration currying favor with an organized voting bloc in the form of the United Auto Workers union at the expense of unorganized retirees.
for not knowing what i am talking about, there sure are a lot of people who agree with me.
May 15, 2009 at 12:59 a.m.
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I also posted many times that GM common stock would go to ZERO. It was not a matter of if, just when. Well, it's well on its way. ALL the top executives liquidated their ENTIRE stakes earlier this week, and the stock is down to about $1 a share. It's basically an option contract price now. Talk about the short sellers dream stock the past year and a half! Everytime the value got cut in half from $40 on down your cashing 50% each time you cover! :-)
May 15, 2009 at 12:49 a.m.
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This article just details further the problem with China I have been posting about many times on these blogs. They simply hold ALL the leverage over the US now. They prop up our dollar artificially by buying trillions of our treasury bonds so they can destroy us in a MASSIVE trade gap. Any threat to restrict trade with them, all they have to do is threaten to refuse financing our reckless deficit spending. If that were to happen, the dollar would totally crash as the government would have no way to meet their obligations without massive cuts in everything (never would happen), or a monumental $$$$ printing operation that would decimate the dollars value almost over night..
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China is the only country that has the capital to finance our recklessness (Japan and Saudi Arabia; who are also big financiers of our debt, economies are hurting big) an arrangement that works HEAVILY in their favor, and gives them unbelievable leverage over us.
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We are pretty much beyond screwed at this point. This country no longer produces much of anything. Look at all your manufacturing that use to be the backbone of this country all flocking over seas. It will not be long before the US dollar collapses, and the role of world super power, is long gone.
May 14, 2009 at 11:20 p.m.
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Please everyone watch this video and you will see why GM is leaving our city. We can not compete with this..http://www.youtube.com/watch?v=oqTDroaJePQ
Thanks
May 14, 2009 at 11:12 p.m.
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booch11,
Chrysler was well on it's way to bankruptcy long before Obama even took office. They were bankrupt during the Bush administration (you know, when they received the first of many bailouts), but I certainly don't blame Bush for Chrysler's problems. If Obama forced a Chrysler merger with Fiat, why did they declare Chapter 11 anyway? You don't know what you're talking about.
As for GM, Obama did what any major creditor would do...demand a change in management. And that hurt GM how? Would GM have somehow survived under Wagoner? Of course not.
What, exactly, is a "stronghold" of the company? I thought Obama was running things?
Turn off Rush and Hannity, and read some honest reporting about the auto industry.
May 14, 2009 at 11:05 p.m.
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wages for an auto worker in china? about $1,500 annually.
wages for other manufacturing jobs? about $75 -- $150 a month.
in china "worker's rights" do not exist. so, forget about making that money for a mere 40 hours a week.
i don't give a crap how cheap food is, that's not a very good wage.
May 14, 2009 at 10:56 p.m.
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zoom,
whatever planet you've been on must not have the same news as us.
the one forced chrysler's hand demanding the company merge with fiat or face bankruptcy. he also oversaw the selling of the stock to allow the union to gain a stronghold of the company.
as for gm, he fired the ceo and is very active in decisions being made there.
ford on the other hand, refused tarp funds and can gladly lay claim to good management and a strong backbone.
you need to get your facts straight.
May 14, 2009 at 10:50 p.m.
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booch11, had you done your homework you would know that a Chinese person working at a manufacturing plant can make in five years what someone in the countryside makes in a lifetime. The liberal UN doesn't even use wage comparisons anymore they use purchasing power parity because if you make .25 and bread is only .01 then you aren't doing too badly.
GM got loans which they have to pay back. On a more humorous note - are these cars from China made of lead or steel?
May 14, 2009 at 10:50 p.m.
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booch11, contrary to what you hope to be true, Obama and the administration does not decide what factories are closed, or what cars are made where. Place blame where it belongs, on the failed car companies. If you're going to blame Obama for Chrysler's and GM's failings, you might as well credit him for Ford's success (so far).
May 14, 2009 at 10:45 p.m.
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Relax folks. GM is just planning to import the small cars that they aren't building or selling much of here anyway. Unfortunately, they chose China. I could live with almost anywhere but China.
May 14, 2009 at 9:57 p.m.
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Im so sick of hearing about GM this and GM that I could puke!
May 14, 2009 at 8:35 p.m.
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hmmmm, kenosha plant closing despite promises to the contrary.. moving jobs to mexico.
gm to import chinese cars.
keep up the good work mr obama -- enjoy your one term.
ps -- just wondering what a sustainable wage is in china? .25 an hour? wonder if the libs protesting shoes and clothing manufactured in china at slave wages will be front and center on this policy?
May 14, 2009 at 8:26 p.m.
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That recent publicity photo of Air Force One flying only 1,500 hundred feet above the Statue of Liberty with an F-16 escort, that stirred up so much panic in New York and costed American taxpayers nearly $500,000, should have been been released to the general public via a shiny new Postal Service mailing labeled "This is How We Waste Your Money"
Call me a cynic, but I think they just wanted to lull us into a false sence of impending dread, unless we didn't support the newest waste of Department of Defence spending program they're cooking up.
What do they want now? More pork barrel funding to put a nano-cam on an insects torso?
Where does it ever end?
May 14, 2009 at 7:36 p.m.
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I will gladly pay more to make "made in America" mean something !!!!
May 14, 2009 at 7:34 p.m.
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What would be the point of saving General Motors if they do not manufacture in the U.S.?
If no one in the U.S. has a job, who will buy these foreign cars that GM is distributing for the Chinese?
I'm glad my Grandfathers are not here to witness this treachery.
(K)orea (I)nvades (A)merica, Chevy Aveo's made in Korea, Chinese imports with Chevy bowties on the hood?
Maybe the schools should be teaching Mandarin, or Korean, so our new leaders can tell us which bread line we can stand in.
May 14, 2009 at 7:18 p.m.
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If General Motors wants to import vehicles from China, screw them. I'll just buy Toyota. They last longer, anyway. And that way I'll know I'm not helping to support a Communist Regime that treats their citizens like swine manure.
The whole concept of "Buy American" went down the toilet 35 years ago. Thanks to the previous generation. So I could give a rats hindquarters about todays economy. I have been assimilated.
I am no longer going to vote (polititians are ALL THE SAME).
I am no longer going to give a rat's about how local "government" wastes our money (can't do a thing about it)
Won't care about how other people look at me for feeling this way (their opinions are useless, and I don't care)
I could just care less, anymore. I wish I was Canadian (and yes, I am looking into that, to)
May 14, 2009 at 4:32 p.m.
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Wonder if these imports are still going to be considered "American" for the Buy American Chanters?
May 14, 2009 at 10:20 a.m.
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I cannot believe it, but I agree with 916WI!!
Not the most ideal circumstances, but short term sacrifice will result in long term gain!
And, don't get me wrong, it does bother me that GM plans to close 4 plants: equal to the amount of import production. But, really, at this point in time--what are they going to do??
May 14, 2009 at 7:11 a.m.
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localboy--GM cannot compete in it's market without making moves like this. If they are not allowed to restructure the way they do business--including the amount of product they import--the company will completely fail and everyone employed by them will be out of a job. It's not the most ideal solution, but these are not ideal times. GM lost $6 billion in the 1st quarter. There's no way they can keep bleeding cash like this. Are the taxpayers supposed to indefinitely support this company while it continues to lose money operating under it's antiquated business structure?
May 14, 2009 at 6:51 a.m.
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916WI - you are wrong (IMO). My tax dollars went to help (loan) GM and they want to take that money they are operating on and import vehicles? I am not a big fan of the UAW and I am a true believer in capitalism, but I have to draw the line here. Don't spend my tax dollars to force Americans out of a job by bringing in foreign crap!
May 14, 2009 at 6:13 a.m.
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GM needs to do whatever it can to remain financially viable. They are competing against companies that do not have the same restrictions/costs placed on them by UAW and unless they are allowed to shed these, there is no chance of them ever being profitable again. The UAW needs to step aside and let GM do whatever it needs to to save itself......
May 14, 2009 at 5:50 a.m.
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Couldn't be any worse quality than the G6 I owned! Ok, maybe. I know the company I work for imports a lot of junk from China, but when you compare that to the Mexican imported junk it almost looks good.
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