GM China joins SAIC with Shanghai GM for new manufacturing facility
This means General Motors Company (NYSE: GM) which traces its roots back to 1908, now has 11 joint ventures, two wholly owned foreign enterprises and more than 35,000 employees in China. GM and its joint ventures offer the broadest lineup of vehicles and brands among automakers in China.
Located in Shenyang’s Auto City Industrial Park, the new facility represents an investment of RMB 7 billion. It will have an annual production capacity of 300,000 vehicles and 450,000 engines when it begins operation in 2014. Its products will be sold by Shanghai GM.
Taking this news to an extreme, in a way the American taxpayer is also part owner in these Chinese joint ventures, as the U.S. government still holds a large position in GM stock.
According to the latest General Motors (NYSE: GM) news release, the new plant covers an area of nearly 2 square kilometers. It will include press, body, paint, general assembly and powertrain shops as well as support facilities. It will adopt many of the same world-class manufacturing, environmental protection, quality and management systems as other GM plants around the globe. Like Shanghai GM, it is expected to be lean, agile, flexible and modular.
“The new plant is an important component of GM’s five-year plan for continued success in China,” said Kevin Wale, President and Managing Director of the GM China Group. “It will enable us to keep up with the rising demand for our products across China. At the same time, it will contribute to the growth of the economy in northern China and the region’s automotive base.”
Of course, GM has held joint ventures with competitors before. The NUMMI plant in California is a case in point, which was recently sold to Tesla Motors (Nasdaq: TSLA) via Toyota Motors (ADR: TM).
To support the new project in China, though, an automotive parts and logistics zone is being planned by the Shenyang government in the Auto City Industrial Park.
For the record, Shanghai GM (Shenyang) Norsom Motors was established in 2004. Shanghai GM holds a 50 percent stake and oversees management. GM China and SAIC each hold 25 percent stakes. The joint venture manufactures the Buick GL8 family and the Chevrolet Cruze compact sedan. It is the largest passenger car manufacturer in northern China’s Liaoning province.
And elsewhere in China, passenger cars and commercial vehicles are sold under the Baojun, Buick, Cadillac, Chevrolet, Jiefang, Opel and Wuling brands which makes these ventures a success. In 2010, for example, GM sold more than 2.35 million vehicles in China, which represented 28.8 percent growth over the prior year. It has also been the sales leader among global automakers in the market for six consecutive years.
As an investor, this writer must ask the following question: Since most joint ventures eventually split up over time, will these ventures become competitors for GM in the global marketplace?
Full Disclosure: At time of publication, Sherosky, creator of the auto sector charts for TN, is neither long or short with the mentioned stocks or futures, though positions can change at any time. None of the information in this article constitutes a recommendation, but an assessment or opinion.
About the Reporter: After 39 years in the auto industry as a design engineer, Frank Sherosky now trades stocks, futures and writes articles, books and ebooks like, "Perfecting Corporate Character," "Awaken Your Speculator Mind", and "Millennial World Order" via authorfrank.com. He may be contacted here by email: [email protected] or via his Twitter i.d. @Authorfranks
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