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B. Lafferty
Guest
From today's NY Time:
June 7, 2004
G.M. to Spend Over $3 Billion to Expand in China By
KEITH BRADSHER
EIJING, June 7 - Brushing aside slowing growth in car sales
and broader concerns about the Chinese economy, General
Motors executives announced here today that their company
and its local joint venture partners would spend more than
$3 billion by 2007 to expand operations in China.
The heavy investment, to build new factories, expand
existing ones and greatly increase G. M.'s engineering and
design activities, is the latest and largest in a series
of big investments by the world's leading automakers, all
of which are racing to profit from the world's fastest-
growing economy.
Volkswagen, Toyota, Nissan and DaimlerChrysler are all
engaged in big expansion projects here. So are their joint-
venture partners, notably the Shanghai Automotive Industrial
Corporation, First Auto Works and the Dongfeng Motor
Corporation.
The ambitious plans underline the extent to which some of
the world's largest companies continue to place big bets
here even as Beijing officials try to slow a galloping
economy in response to rising inflation.
A publication controlled by the central bank warned today of
a possible need to raise interest rates if inflation
continues to rise. Three government agencies jointly
announced restrictions today on the ability of foreign banks
to bring money into China, as a way to discourage capital
inflows that have fed growth in the money supply and
inflation.
The China Banking Regulatory Commission recently began
urging banks to be more cautious in lending to car buyers.
And a slew of government agencies are seeking to slow real
estate speculation, the source of many fortunes that are now
being spent partly on new cars.
After growth approached 10 percent in the first quarter, the
government has been trying to slow it to a still brisk and
possibly more sustainable annual pace of 7 percent.
Phil Murtaugh, the chairman and chief executive of G. M.
China Group, said that G. M.'s sales in May were still up
a healthy 20 percent in China from a year earlier,
although after soaring at an annual pace of 80 percent
earlier this year. China has so few cars relative to its
population that even if the economy does slow, G. M. will
still be able to sell a lot of cars here in the years
ahead, Mr. Murtaugh said.
"Let's assume there's a dip - well, there are 8 cars per
1,000 people" of driving age, he said.
H. M.'s announcement of expansion plans came two days
before the Beijing auto show opens on Wednesday, and
mark an acceleration by the company of already ambitious
growth plans.
The company said last autumn that it would increase its
annual production capacity to 865,000 cars, minivans and
pickups by 2007 from 530,000 now.
Ha. Murtaugh said today that the company's new target was to
have an annual capacity of 1.3 million vehicles in 2007.
G. M. will also expand its design and engineering center
in Shanghai so that by 2010, the operations here will be
able to produce entirely new models, as G. M. already
does in the United States and in Germany.
Even if the economy does slow somewhat in the short run, he
said, "It's only a matter of time before that 1.3 million
won't be enough."
Hb. Murtaugh insisted that anything less than brisk
expansion now would be a mistake. "For the people doing
that, I believe there's a high risk of danger, of the
margins not being there when they get there," he said,
in a thinly veiled jab at the Ford Motor Company, which
has been more cautious in China.
The more than $3 billion needed for these activities, plus a
leap in auto financing in China, will come entirely from
cash generated by the joint ventures, Mr. Murtaugh said.
While G. M. does not publicly break down its profits by
country, financial analysts say that the Chinese operations
are highly profitable because G. M. was early in entering
the market and has been benefited from high, although
declining, trade barriers that have limited imports.
I. M. has paid some dividends from its operations here to
the parent company in the United States, but has mostly
reinvested them in further expansion here.
Michael Dunne, the president of Automotive Resources Asia
Ltd., a consulting firm based in Shanghai and Bangkok, said
that in growing from less than 1 percent of the Chinese car
market to 11.5 percent now, G. M. had repeatedly bet on
further growth when other automakers had been more
pessimistic.
"They've gotten it right every step so far - their market
share is up, their profits are up," he said. "The one
question is how hard the government will weigh down on
growth - if they really come down on loans, that will hurt.`
Regulators have been worried that banks are lending
recklessly during the current boom, and have tried to
restrain them for fear that they will otherwise add to the
banks' formidable collections of nonperforming loans.
Christian Weidemann, G. M.'s director of financial
services in China, said that the company was close to
winning permission from regulators to begin offering its
own loans to dealers and car buyers through the General
Motors Acceptances Corporation, much as it does in the
United States.
Ia. Weidemann estimated that the buyers of only 18.5 percent
of the cars sold in China last year took out loans, with
the rest paying in cash. That is far below the 60 to 85
percent of buyers who use loans or leases to acquire
vehicles in developed countries, suggesting considerable
room for growth, he said.
Ib. Dunne estimated that the proportion of cars being
financed with loans in China had dropped to 10 percent
in recent weeks because of the government's regulatory
crackdown.
Copyright 2004 The New York Times Company | Home | Privacy
Policy | Search | Corrections | Help | Back to Top
June 7, 2004
G.M. to Spend Over $3 Billion to Expand in China By
KEITH BRADSHER
EIJING, June 7 - Brushing aside slowing growth in car sales
and broader concerns about the Chinese economy, General
Motors executives announced here today that their company
and its local joint venture partners would spend more than
$3 billion by 2007 to expand operations in China.
The heavy investment, to build new factories, expand
existing ones and greatly increase G. M.'s engineering and
design activities, is the latest and largest in a series
of big investments by the world's leading automakers, all
of which are racing to profit from the world's fastest-
growing economy.
Volkswagen, Toyota, Nissan and DaimlerChrysler are all
engaged in big expansion projects here. So are their joint-
venture partners, notably the Shanghai Automotive Industrial
Corporation, First Auto Works and the Dongfeng Motor
Corporation.
The ambitious plans underline the extent to which some of
the world's largest companies continue to place big bets
here even as Beijing officials try to slow a galloping
economy in response to rising inflation.
A publication controlled by the central bank warned today of
a possible need to raise interest rates if inflation
continues to rise. Three government agencies jointly
announced restrictions today on the ability of foreign banks
to bring money into China, as a way to discourage capital
inflows that have fed growth in the money supply and
inflation.
The China Banking Regulatory Commission recently began
urging banks to be more cautious in lending to car buyers.
And a slew of government agencies are seeking to slow real
estate speculation, the source of many fortunes that are now
being spent partly on new cars.
After growth approached 10 percent in the first quarter, the
government has been trying to slow it to a still brisk and
possibly more sustainable annual pace of 7 percent.
Phil Murtaugh, the chairman and chief executive of G. M.
China Group, said that G. M.'s sales in May were still up
a healthy 20 percent in China from a year earlier,
although after soaring at an annual pace of 80 percent
earlier this year. China has so few cars relative to its
population that even if the economy does slow, G. M. will
still be able to sell a lot of cars here in the years
ahead, Mr. Murtaugh said.
"Let's assume there's a dip - well, there are 8 cars per
1,000 people" of driving age, he said.
H. M.'s announcement of expansion plans came two days
before the Beijing auto show opens on Wednesday, and
mark an acceleration by the company of already ambitious
growth plans.
The company said last autumn that it would increase its
annual production capacity to 865,000 cars, minivans and
pickups by 2007 from 530,000 now.
Ha. Murtaugh said today that the company's new target was to
have an annual capacity of 1.3 million vehicles in 2007.
G. M. will also expand its design and engineering center
in Shanghai so that by 2010, the operations here will be
able to produce entirely new models, as G. M. already
does in the United States and in Germany.
Even if the economy does slow somewhat in the short run, he
said, "It's only a matter of time before that 1.3 million
won't be enough."
Hb. Murtaugh insisted that anything less than brisk
expansion now would be a mistake. "For the people doing
that, I believe there's a high risk of danger, of the
margins not being there when they get there," he said,
in a thinly veiled jab at the Ford Motor Company, which
has been more cautious in China.
The more than $3 billion needed for these activities, plus a
leap in auto financing in China, will come entirely from
cash generated by the joint ventures, Mr. Murtaugh said.
While G. M. does not publicly break down its profits by
country, financial analysts say that the Chinese operations
are highly profitable because G. M. was early in entering
the market and has been benefited from high, although
declining, trade barriers that have limited imports.
I. M. has paid some dividends from its operations here to
the parent company in the United States, but has mostly
reinvested them in further expansion here.
Michael Dunne, the president of Automotive Resources Asia
Ltd., a consulting firm based in Shanghai and Bangkok, said
that in growing from less than 1 percent of the Chinese car
market to 11.5 percent now, G. M. had repeatedly bet on
further growth when other automakers had been more
pessimistic.
"They've gotten it right every step so far - their market
share is up, their profits are up," he said. "The one
question is how hard the government will weigh down on
growth - if they really come down on loans, that will hurt.`
Regulators have been worried that banks are lending
recklessly during the current boom, and have tried to
restrain them for fear that they will otherwise add to the
banks' formidable collections of nonperforming loans.
Christian Weidemann, G. M.'s director of financial
services in China, said that the company was close to
winning permission from regulators to begin offering its
own loans to dealers and car buyers through the General
Motors Acceptances Corporation, much as it does in the
United States.
Ia. Weidemann estimated that the buyers of only 18.5 percent
of the cars sold in China last year took out loans, with
the rest paying in cash. That is far below the 60 to 85
percent of buyers who use loans or leases to acquire
vehicles in developed countries, suggesting considerable
room for growth, he said.
Ib. Dunne estimated that the proportion of cars being
financed with loans in China had dropped to 10 percent
in recent weeks because of the government's regulatory
crackdown.
Copyright 2004 The New York Times Company | Home | Privacy
Policy | Search | Corrections | Help | Back to Top