Tuesday, July 21, 2009

Despite Troubles In the U.S., GM Thrives Abroad; Sales in China Increase by 38%

National Public Radio -- General Motors, once the world's largest automaker, has had a rough few months. In June, the company filed for bankruptcy. Last week, as part of a massive restructuring plan, 60 percent of the company's ownership shifted to U.S. taxpayers.

However, the news isn't all doom and gloom for the U.S. auto giant. Many of the company's international operations are posting strong gains. In China, GM's second-largest market, sales jumped to 814,442 units in the first half of 2009 from 590,132 during the same period in 2008 — an increase of 38% (see chart above). And in Latin America, seven countries set GM sales records in 2008.

MP: In the first half of 2008, GM sold almost three times (2.7X) as many cars in the U.S. (1,589,000) as in China (590,132), and this year vehicle sales are almost the same in both countries: 947,518 in the U.S. (data here for U.S.) compared to 814,442 in China.

For GM's sake, let's hope they don't start a "Buy China" campaign, or start erecting signs saying "Parking of U.S. vehicles strictly prohibited and will be towed at owner's expense."


At 7/21/2009 10:51 AM, Anonymous Anonymous said...

Professor, it's even more complicated than you state.

All GM parking lots are open to all GM vehicles wherever they are made.

The local U.A.W. lots are open to "American Made" cars, which they define as not Toyota, Nissan, or Honda. . . .

The International U.A.W. and Black Lake are open to union-made vehicles assembled in the U.S. or Canada. You can ask many union guys and girls about having their $50,000 Chevy Suburbans assembled in Mexico towed from the union-owned Black Lake resort :)

In the end, it doesn’t really matter anyway because the consumer will chose whichever car they want. It is a complete waste of time thinking otherwise.

At 7/21/2009 11:09 AM, Blogger misterjosh said...

Those cars were made in China. That's all well and good, but one of the problems with this is that GM couldn't have sold those cars in China if they'd been made here in the U.S.

How is this free trade?

At 7/21/2009 11:33 AM, Anonymous Tom said...

Thriving, eh? I am apparently unable to read a chart, to me, looks like sales took a dive.

At 7/21/2009 11:40 AM, Blogger Mark J. Perry said...


The headline says that GM sales are thriving abroad, in places like China, where sales increased by 38% from 2008 to 2009 (Jan to June).

At 7/21/2009 11:50 AM, Anonymous Benny The Libertarian said...

I am a free trader, but I must say, China's mercantile-fascist system seems to be outperforming our system.
In fact, all the Far East nations will easily eclipse us in the next 30 years, in living standards, technical development etc.
They have rushed ahead, eschewing advice about free trade, immigration, state-control of banks and so forth.
I suppose one could respond they would have done even better adopting true free trade, or that the USA would have done better if we were more free enterprise.
And obviously culture plays a huge role, bigger than economists can understand. A culture with respect and a work ethic will do well, even if the government is business and vice-versa.
Still, look at China rocket ahead. Japan is a nicer place to live than the USA. S. Korea making huge strides. Government as a pro-business ally seems to work, even with the inevitable corruption.
In another 30 years...China will bury us. It will be their world, and they will not have fired a shot. They will be doing the oil deals in Africa, and the trade in SE Asia, and they will be Europe's biggest trading partner.
I am not sure it matters, in a way. Being a world player is very expensive (done USA-style) with few tangible rewards. I think our foreign embassies and military like being important, but it should has cost the US taxpayer a wallop.
Maybe we will actually be happier as a backwater has-been nation, laughed at for our expensive foreign follies and dissipated industrial base.
Hey--I just read Afghanistan now produces 93 percent of the world's opium. Under Obama, we have decided to not try suppression of crops, but to rather control who makes money from dope in Afghanistan. In other words, we want the Afghanie government to make money from dope. A narco-state.
In Iraq we established an Islamic state, not a secular state. That cost a cool trillion or so. That was Bush's idea.
I am glad to pay for all of this.

At 7/21/2009 1:28 PM, Anonymous gettingrational said...

The grand bargain is that a few thousand autos are imported into China. In return many hundreds of thousands are cars will soon be exported to the U.S. This is by way of a joint venture where minority ownership status insures technology transfer.

What does GM get for this? GM will get a rebate for 17% on the
VAT (export subsidy) as well as a price advantage of probably 40% based on currency advantages of Chinese manufactured goods for export to the U.S. This is a 57% price advantage right off the top. Why even try to their U.S. made cars into China?

At 7/21/2009 2:46 PM, Anonymous Ἐγκώμιον Shill said...

"Hold on thar Nancy! You just paid 31 billion of our tax dollars to bail out a Chinese car company."

"Don't worry none, Mr. Constituent, General Mongol will be paying thet tax money straight back to Communist Revenue Service in no time flat."

"Just you pray for gridlock folks. Don't forget to vote now ya-hear"!

At 7/21/2009 4:20 PM, Blogger Hot Sam said...

This comment has been removed by the author.

At 7/21/2009 4:36 PM, Blogger QT said...


Like Germany after WWII, China and India have huge potential productivity gains. It is far more difficult to achieve major gains in productivity in the U.S. and other advanced economies which is why growth rates tend to slow in mature economies.


57% price advantage? Do you have a credible source to back that up? Your back of the envelope calculations don't seem to include shipping costs.

At 7/21/2009 5:47 PM, Blogger Hot Sam said...

This comment has been removed by the author.

At 7/21/2009 10:43 PM, Blogger QT said...

..or c) you manage to compete like Japan, South Korea, Singapore and Taiwan have done for years.

At 7/21/2009 10:57 PM, Anonymous Benny The Free Marketeer said...

Robert Miller-
Okay, we get it, you aced Econ 101. The theories of absolute and relative advantages etc etc etc.
Still, there are huge institutional imperfections (at least that is what they called them in the 1970s) in the global economy.
We see examples of nations obtaining rapidly rising living standards by generally eschewing the dogma of Western economists, China comes to mind.
We have also seen nations collapse, sometimes repeatedly, after following IMF free market guidelines and budgetary rules (don't cry for me Argentina).
For a polyglot, immigrant nation like the USA, free market principles are probably best (I like them for reasons of personal freedom).
Still, I am not sure free market principles work everywhere, for every culture.
Sheesh, I am not even sure free trade has worked for us. The social instability caused by free trade has very high costs. I guess it owkrs until some unemployed guy caps you. As you were saying about Compton the other day? Compton used to be a nice place. (I believe George Bush Sr. actually lived in Compton briefly years back, if you can believe that, shortly after WWII).
SoCal used to be a manufacturing heartland. There used to be 900,000 factory jobs in LA County. The social stability in cities like Bell, Bell Gardens, Long Beach, Lynwood, South Central LA, I could on and on. Prosperous neighborhoods for miles, workers with houses. This was the genesis of Ronald Reagan's commentary, "In America, the workers have pools in their backyards."
The cratering of our industrial base has come with a huge price.
I realize you have an asbestos outpipe, and you can take a red-hot rebar right up the exit valve, and only smoke out the ears as a result.
But you don't have to spin on it just to show off.

At 7/22/2009 4:48 AM, Blogger Plamen said...

Benny, when you start off a ridiculously low base, it's easy to show big gains in living standards - the USSR did after the 1917 revolution too. How was it done? By applying selectively some "stuff" the civilized world had been using for centuries. It's a testament of how badly Russia (and China nowadays) had been doing before, not so much of how well they are doing now. "Rapidly rising" is not the same as wealthy. China is still very poor.

I am no fan of the IMF either, but Argentina cannot be laid at their feet - it has hardly stuck by their advice. On the other hand, currency boards (see Bulgaria) work remarkably well, since they effectively take away corrupt local governments' power to print money.

Your point - "economics does not apply here" - was made in Bulgaria too. Sure it does not, as long as you allow politicians to torpedo it. Take away that power, and it works like magic.

On the other hand, if you are genuinely bemoaning "social instability"... what exactly school of libertarian thought do you subscribe to? The Marxian kind? This kind of instability arises when you have fostered a welfare state, and then it inevitably fails to deliver. This is not the fault of free trade, it's the fault of the welfare state.

Do you, while wearing a libertarian badge, want me to subsidize others so they do not "pop" me?

At 7/22/2009 10:16 AM, Blogger QT said...


Isn't 58,000 protests involving 5 million civilians in a single year social instability? Does this look like paradise to you?

When I was in Beijing before the Olympic games, the chinese government was knocking down thousands of houses to widen the streets. Life may have improved for the people but it is a far cry from the political and economic freedom not to mention property rights enjoyed in the U.S. Consider migration in China which in scale is unprecedented in human history. All is not moonlight and cherry blossoms in China.

I will agree that some individuals will not be able to transition from manufacturing jobs to jobs in the new economy. That being said the U.S. also has a shortage of skilled labour. Welders, electricians, plumbers, tool & dye, crane operators, roofers, etc. How do you outsource electrical contracting? Uh...you don't.

Jobs have been going down for years in the manufacturing sector largely due to mechanization. This trend was taking place long before the rise of China. China accounts for only 16.1% of U.S. imports.

Change is the one thing that is a given in our lives. Politicians and organizations like the UAW often try to preserve the status quo but in the long run, this often results in missed opportunities.

Tales from the permit raj demonstrates how counterproductive it can get.

At 7/22/2009 10:33 AM, Anonymous Anonymous said...

QT said: Politicians and organizations like the UAW often try to preserve the status quo but in the long run, this often results in missed opportunities.

Almost everyone resists change because it takes them out of their comfort zone; change takes work and effort. This is most certainly not a UAW attribute that is any different than the general population.

I work two jobs--one union and one not. I teach a skilled labor group that you mentioned. I wish I could get the protection of tenure in my non-union job that some union bashers and those with golden parachutes enjoy. At-will employment sounds like a great concept until you are that at-will employee.

At 7/22/2009 10:57 AM, Blogger QT said...


There is another option...an at-will entrepreneur.

Interesting that entrepreneurship wasn't one of your options.

There is no way to lock up all the spindles in the kingdom and guarantee a shock-free existence. Change also offers opportunity, challenges, excitment, innovation, personal growth, technological improvements and improved living standards.

The problem with unions is primarily that they rob one of initiative. Life is not meant to be a sure thing; it is meant to be lived on the edge where we discover the full range of our abilities.

At 7/22/2009 11:16 AM, Anonymous Anonymous said...

QT said: "Interesting that entrepreneurship wasn't one of your options."

I've worked two jobs, worked overtime, went to school, or taught school for an average of 80-hours-per-week for well over 30 years. Not a lot of time for other options.

Initiative you say?

As a UAW worker, I am not unique in my numerous endeavors both inside and outside of work. With all due respect, QT, you need to be careful with your stereotypes and preconceived notions of people. Not all black people like fried chicken and watermelon, either.

At 7/22/2009 11:48 AM, Anonymous Benny The Libertarian said...

I am a libertarian and a free-trader. I am just not sure it works in the real world.

At 7/22/2009 12:11 PM, Blogger QT said...


You have taken lots of degrees and have many accomplishments. The one thing you have never done is run a business despite taking every conceivable course in business administration.

I find that singularly interesting. My word choice was poor, I should perhaps have used the words "risk aversion" rather than "initiative".

At 7/22/2009 12:21 PM, Blogger misterjosh said...

"1. There are unambiguous gains from trade, EVEN IF one country has trade restrictions and the other does not. Trade restrictions only hurt YOURSELF."

I'm not arguing with this fundamental economic principle, but I think it is oversimplified. Trade restrictions hurt in the long run, but as China and Brazil can attest, they're awfully helpful in the short term.

I would also say that our trade freedom help US AND China, but that the flipside is also true. Their restrictions hurt us in the short-run, and themselves in the long run.

At 7/22/2009 12:27 PM, Blogger QT said...


I agree that there is no one right formula for making an economy work. Life is a bit more complex than that. Certainly agree that the IMF is quite reviled in many developing countries ie. Thailand.

There does seem to be some agreement among economists about elements of a society that are helpful such as strong institutions, rule of law, property rights, etc. Often history helps to sort some of these issues. You might enjoy "Commanding Heights" or "The Ascent of Money", both quite interesting reads.

It seems that your conflicted opinion has been drawing fire recently as disingenuousness or not related to the post. Perhaps, there are some issues that we have to work out for ourselves.

At 7/22/2009 12:27 PM, Anonymous Anonymous said...


I run my personal finances as a business. I can tell you what percentage of my income my electric bill was 3 years ago :) And sadly too, how much money I lost on GM common stock.

I prefer the term "risk aversion" much better than "initiative." People often underestimate the value in investing in themselves.

At 7/22/2009 12:50 PM, Blogger QT said...

Yes, Walt, they do.

At 7/23/2009 1:52 AM, Blogger sethstorm said...

...like Japan, South Korea, Singapore and Taiwan have done for years.

In terms of automotive products, knock-offs and golf carts come from those nations you named. Korea has yet to come up with something original in car design, Japan has yet to build anything that doesn't cater to the lifestyle environmentalist, and the rest build or enable the practice of knockoff parts.

At 7/23/2009 10:20 AM, Anonymous gettingrational said...

@ QT

You point out that China accounts for only 16.1% of U.S. imports BUT China accounts for a huge part of the U.S. trade deficit. According to the BEA and U.S. Census figures, for May 2009, that were released July 10th the U.S. trade deficit was 27.8 billion dollars. Of that 27.8 billion the deficit with China was 17.6 billion!

On General Motors specfically: There is an extensive case study by Andrew Szamosszegi at WWW.STEEL.Com on the offshoring of of autos and auto parts. On page 1of the study it is stated that "China requires U.S. automakers with operations in China to buy their parts in China as a condition of granting production licenses. U.S. automakers have complied, despite the fact that China's requirement is WTO-illegal".

Page 18 & 19 state that "GM is in a joint venture with the Shanghai Municipal Asset Committee (SAIC), which is headed by Shanghai's mayor. (This is a local government enterprise)."

On page 21 it is stated "VAT exemptions are available for foreign-invested enterprises (and other enterprises with export rights) and higher rebates exist for exported goods (including cars and car parts) that are encouraged by the government..."

GM in China is Government Motors as well as the U.S.! GM can not afford to export cars to China from the U.S. because of they will be taxed by the Chinese government (VAT) and by the currency manipulation of the Yuan by the PRC. They are futher "encouraged" to build cars in China with Chinese content, transfer technology as an entrance rquirement based on "competition" for rights to sell in China and then have their exports to the U.S. subsidized.

The rest of the story of the loss of manufacturing jobs by the U.S. to China is wide and deep. China manages it trade very effectively on both the import and export side.


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