Emerging Markets: GM's Only Bright Spots Lately. They May Play An Important Role in GM's Future
NY TIMES -- As G.M. painfully restructures in the United States and Canada, and spins off its European business, the company’s operations in emerging markets like China, India and Brazil have survived, so far, virtually unscathed.
Unlike G.M.’s United States business, these operations have been growing. Sales increased 10% last year in Brazil, 9% in India and 6% in China. Recent numbers in some areas are even better — G.M.’s sales in the Asia Pacific region were up 44% in May compared with the year before.
Cheap labor in these markets helps to bolster profit margins, while millions of people who do not yet own a car make sales growth easy. Karl Slym, president and managing director of G.M. India, said he expected to add 50 dealers in India this year, stretching into the rural market.
Emerging markets have been the only bright spots at G.M. for some time. The North American and European businesses have racked up enormous losses — $14.1 billion from North America’s continuing operations before taxes in 2008. In Europe, G.M. lost $2.8 billion before taxes in 2008, but G.M.’s Latin American, African and Middle Eastern operations earned $1.3 billion before taxes in 2008, down slightly from the year before.
MP: Let's just hope that our "Buy American" policies don't backfire. GM's future profitability, like many other American companies, might rely pretty heavily on overseas markets to survive. Without the profitabilty of emerging markets (about $2.5 billion) over the last two years, GM would probably be in even worse shape today.
See related CD post above on "Buy American."
HT: Sanil Kori