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Is GM Becoming ‘China Motors’?


Q: Is General Motors becoming ‘China Motors’ using taxpayer dollars?

A: No. The restructured GM is still based in Detroit and is still one-third owned by the U.S. government. But it sells nearly as many cars in China as in the U.S. and has continued expanding operations there.

FULL QUESTION

How much of this is true?

Subject: Video – No more GM cars for me!

WHAT AN EYE-OPENER!
No more GM cars for me.

Even if this were only half true it would light a fire under you. Trouble is, it’s ALL true !!!

CLICK ON the LINK below and open up your eyes….

http://www.youtube.com/watch_popup?v=Lvl5Gan69Wo

YES, YOUR TAX MONEY AT WORK, THANKS TO THE OBAMA ADMINISTRATION !!!!!

 

FULL ANSWER

Several readers have asked us about the claims stated in a viral video that criticizes General Motors’ expanding operations in China. The video has received more than half a million views on YouTube since it was posted May 4. The narrator, a man who gives his name as Vince Wade, asks: “Did we bail out GM so that it could become a Chinese company?”

It’s a fair question. The short answer is, “No.”

Still American

GM is still a U.S.-based multinational auto company, incorporated in Delaware and headquartered in Detroit. In fact, according to the Congressional Budget Office, about 33 percent of the stock in GM is still owned by the U.S. Treasury as a result of a taxpayer-assisted bankruptcy and downsizing in 2009.

But the company sells cars in more than 120 countries and accounted for nearly 12 percent of all car and truck sales worldwide last year (11.9 percent, according to GM’s annual report). It’s also true that China is now the largest market for car sales on earth. Total car sales in China surpassed those in the U.S. in 2009. China retained the lead in 2011, and that lead is expected to grow in the future.

So like it or not, the world’s automakers have been drawn to this huge and growing market, and GM has been particularly successful there. The video’s narrator clearly doesn’t like it.

His video asks, “Was the bailout a mistake?” And he goes on to quote an account criticizing GM’s Cadillac brand for supposedly currying favor with “the underworld mob that runs China.”

We won’t offer opinions on whether or not GM or any other company should be doing business in China, or on other controversial issues on which the narrator takes a stand. Our job is to look at the facts.

Overall, the video gives a one-sided picture. And on a couple of points it misleads. Here we offer a more complete and accurate picture, so readers may decide for themselves how they feel about GM’s dealings in China.

GM Expanding

Narrator Wade states that “GM has been shrinking its U.S. operations, while it’s aggressively expanding and investing in the People’s Republic of China.” But the fact is GM is currently expanding in both places.

It’s true that GM shrank much of its U.S. operations — shedding old brands and dealerships and many workers — when it went through bankruptcy in 2009. The alternative was to go out of business entirely.

But since then, the “new” GM has enjoyed expanding sales and operations. For example, it  announced in January that it is building a new, $200 million stamping plant in Arlington, Texas. And it states: “Since June 2009, the company has announced more than $6.9 billion of investment to upgrade or expand operations in 12 states, creating or retaining more than 17,600 jobs.”

It’s true that GM also has been expanding in China — but that was true long before the bailout. The “old” GM (the one that went bankrupt) was the largest foreign car maker in China in 2008, battling for supremacy there with Volkswagen.

The “new” GM has continued that overseas success. It sold a record 231,183 vehicles in China in May, up 21 percent from a year earlier, for example. That compares with 245,256 vehicles sold in the United States, up 11 percent from a year earlier and the highest in 33 months.

Cost to Taxpayers

The video is also misleading as to the cost of taxpayer support. It cites a figure of $80 billion, which actually covers the government’s peak disbursements for both GM and Chrysler, as the narrator mentions in passing. But the net cost of the entire bailout is currently estimated to end up being $19 billion (by the Congressional Budget Office) to $22 billion (by the U.S. Treasury).

Most of that $80 billion has been recovered through interest payments, loan repayments and sale of government-owned stock. And of course, some portion of that is attributable to bailing out Chrysler.

Taxpayers still own about 33 percent of GM stock, according to CBO (other calculations put the total closer to 32 percent). Either way, the final cost of the bailout depends largely on whether the price of GM stock rises or falls between now and when the government decides to sell its shares.

So the better GM does, the less U.S. taxpayers will be hurt. And a key part of GM’s global business strategy is selling and manufacturing cars in China. As then-GM CEO Rick Wagoner said in 2008: “The automaker that gets China right will be the future leader of the industry.”

Global Auto Realities

Much of the video is devoted to showing GM Chairman and Chief Executive Officer Daniel F. Akerson explaining GM’s overseas operations to reporters in Shanghai in February 2011. Akerson noted that almost “seven out of 10 of our vehicles were made outside the United States” and that “we have 11 joint ventures” with government-owned Chinese companies (which the narrator later describes as partnerships with the “autocratic, anti-Democracy, Communist government of China”).

Akerson goes on to say, “We’re involved in vehicle manufacturing, sales, distribution, engineering design” and other auto-related businesses. He also said GM operates 11 assembly plants and four power train plants in eight cities in China.

That may sound surprising to some viewers, but the fact is that building and selling cars outside the home country is standard for multinational auto firms today. Japanese and German firms have many manufacturing facilities in the U.S., for example.

In fact, the top 10 “American-made” cars as ranked by Cars.com include three made by Toyota and two made by Honda (plus three made by GM, one by Ford and one by Jeep, a division of Chrysler, which is still U.S.-based but mostly owned by the Italian auto firm Fiat.) The single most “American” car made and sold in the U.S. today is the 2012 Toyota Avalon, with 85 percent domestic content (meaning parts made in either the U.S. or Canada), according to ratings published by the National Highway Traffic Safety Administration. Two GM passenger vans are tied for second, with 82 percent domestic content. (Toyota’s Matrix has 95 percent domestic content, more than any other vehicle sold in the U.S., but is assembled in Canada.)

GM’s facilities sprawl across the globe. Besides its plants in the U.S. and China, it is the third-largest car maker in Korea. It makes cars in Brazil, has owned Britain’s Vauxhall brand since 1925, and still owns the troubled Opel brand, manufactured in Germany, Poland and Britain, to cite a partial list.

Other Issues

Some of the more than nine-minute video is devoted to flaying Cadillac for its sponsorship of what the narrator describes as “a propaganda film, celebrating the anniversary of the founding of the Communist Party of China.” That much is true enough, and the video includes shots of the premiere with the Cadillac logo sharing the stage with the party’s hammer-and-sickle symbol.

But then the video quotes extensively from a story in the Epoch Times newspaper, in which the reporter cites a “suspicion” that GM was marketing Cadillacs to top party officials to curry their favor. But the full text of the story shows the reporter prefaced that by saying, “I have no proof.” So that speculation may or may not be accurate.

A statement that China’s leaders constitute an “underworld mob” — also quoted — is the opinion of the Epoch Times writer, Matthew Robertson. As the video narrator mentions, the Epoch Times leadership has numerous ties to the dissident Falun Gong movement. Followers were widely persecuted by the Chinese government, and that may color the newspaper’s reporting.

Another issue raised by the video is the sale of the Saginaw, Mich.-based GM supplier Nexteer to a Chinese firm. But the Wall Street Journal reported in February that the deal has turned out pretty well for U.S. workers: “Today, few people in town are wringing their hands about the Chinese. Inside a 59-year-old factory at Nexteer’s sprawling complex, contractors are ripping out antiquated machine lines and installing new equipment to produce an electronic steering system for the next generation of GM’s large pickup trucks and SUVs. The company, for years known as Saginaw Steering Gear, has hired more than 100 engineers in Saginaw last year and is looking for 80 more this year.”

The narrator is critical of both President Barack Obama and the probable Republican nominee Mitt Romney. He states that two big Romney supporters profited from the bailout. That’s based on a report by freelance investigative reporter and author Greg Palast. We can’t vouch for its accuracy. Palast is a veteran fraud investigator with an MBA from the University of Chicago. But as a journalist, he also has his critics.

We of course take no position on whether GM’s operations in China are a good thing or a bad thing, or whether the GM bailout should have been handled differently, or at all. We also take no position on whether car buyers should boycott GM, as the writer of one version of an email suggests in the headline. We only note that there are far fewer “tax dollars at work” than this video suggests, and that — like it or not — the auto business is global, China is the biggest market for cars on the planet, and if GM doesn’t build and sell cars there then others will. So the things this video finds distressing are happening with or without the bailout.

— Brooks Jackson

Sources

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Guillaume, Gilles. “China car sales top U.S.” Reuters. 11 Jan 2010.

Yan, Fang & Ken Wills. “UPDATE 1-China 2011 car sales gains at slowest annual pace.” Reuters. 12 Jan 2012.

Chrysler, Mack. “No Stopping China as Top Global Auto Market, Study Says.” WardsAuto. 4 Jan 2012.

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GM Will Build $200 Million Stamping Facility in Texas.” General Motors Corp. news release. 31 Jan 2012.

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GM Sales in China Up 21.3 percent to set May Record: Sales for first five months of 1.2 million vehicles up 11.5 percent over 2011.″ General Motors Corp. news release. 5 Jun 2012.

GM Reports Highest Monthly Sales in 33 Months.” General Motors Corp. news release. 1 Jun 2012.

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