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GM's Secret Weapon: China and the Rest of Asia

General Motors CEO Dan Akerson has left the building. Specifically, he's taking a few days off from the cutthroat U.S. market, where plenty of critics still call his company "Government Motors," and spending time in China, where GM seems almost universally beloved.

It's a good opportunity to press home GM's substantial advantage over other carmakers in Asia. In January, GM reported that it had sold 2.4 million vehicles in China in 2010, a 29 percent increase. Its China sales in 2010 actually outpaced U.S. sales for the first time ever. GM also crushed Toyota in China, beating its global rival by a more than 2-to-1 sales margin. Akerson calls China GM's "crown jewel."

GM's master strategy: Go where the growth is
The General can't neglect the U.S. market. It's where the company's brands have their roots. But GM is now optimized, via its Chapter 11 streamlining, to turn a profit in a North American market of around 10 million vehicles per year.

In terms of growth, it's going to take a while for the homefront to get back to anything that resembles its 2005 heyday, when it exploded to 17 million vehicles. Something between 14-15 million would be good. But those sales will be hotly contested by pretty much every major global carmaker, many of whom have been doing business in the U.S. for decades.

In China, by contrast, GM has a huge head start. It's being rewarded for not killing its Buick brand back in the dark period of 2008-2009, when it shed other underperforming marques, such as Pontiac. Buicks are big in China and have been for a while. Having established the beachhead and supported it, GM is now looking to catch a wave of developing world growth.

But is GM effectively outsourcing itself to China?

According to Akerson and his lieutenants, GM wants to introduce 20 new models to the Chinese market over the next few years. But there's more. Rather than manufacture vehicles through almost a dozen joint ventures with various Chinese firms, GM now has its sights set on becoming an exporter of vehicles from China.

You can easily see how this sets up from a business perspective. Slow growth in the U.S. means managing a mature business and making sure that GM's brands never fall to the depths that they did before the latest, much-lauded product cycle (or have to be killed or sold off, because they can't be supported or see their customer bases vanish).

But building cars on the cheap in China -- and then exporting the surplus to other high-growth developing markets... well, that's a formula for mega-profits, if GM can get the vehicle mix right and leverage the value of its already powerful world brands, such as Chevrolet.

Getting beyond Buick
GM is deploying a powerful strategy to China. It's half Old GM, half New GM. Old GM always sought to get customers into entry level Chevy and then graduate them up to Cadillac, the top of the line. Buick is the main GM China brand, but Cadillac has seen sales gains in recent years. GM is pushing the vehicles as its true luxury brand, while slotting Buick back into its mid-level role.

Meanwhile, GM is capitalizing on the Chinese government's enthusiasm for smaller, fuel-efficient cars and electric vehicles. This is New GM. It's also a blank slate -- GM will struggle mightily in the U.S. to gain real traction in small cars, and the EV market isn't likely to grow as rapidly as in China. But elsewhere, as a new global middle class emerges, with the power to purchase cars and trucks.... You could call this brilliant and you wouldn't be too far off the mark.


Photo: GM Media
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