This one floored me, but it makes perfect sense.

GM cannot build a motor or transmission in China for the North American market less expensively than they can in the US.

The fact came out yesterday evening while I attended the Marketing and Sales Executives of Detroit dinner. Dave Cole, from the Center of Automotive research stated it.

The reason? GM is so efficient that they build a motor in three hours in the US. The labor rate advantage from China cannot offset the transportation costs.

 

That's an interesting little tidbit.

 

lets hope it stays that way. we obviously can't trust GM to "do the right thing" and keep the engine production here. the fact that they looked into it and have hard data is evidence of how strongly they were willing to concider this option.

 

I knew this four years ago, after talking with some guys from one of their transmission plants

Actually, part of the problem is that there's just not a huge amount of labor in assembling a transmission, relative to the cost of parts and capital equipment. Walk through a GM transmission plant, and there's a huge amount of automation (relative to human labor), and much of it is transfer-line equipment that dates back to the 50s. It's not very flexible, but it was paid-off before most of us were born, and it's capable of making parts faster than the newer high-flex lines that they're using in China.

For what it's worth, autobeatdaily.com reported something similar a few weeks ago, when Honda decided that they were going to supply Europe with subcompacts built in Japan instead of China. The Japanese-built cars were less expensive, and it's not like Japan's a low-labor-cost market.

In less-encouraging news:

http://www.freep.com/money/autonews/...2_20040212.htm

Keep that in mind the next time you decide to "buy American".

 

so what happens if/when we have problems with china and they're stubborn gov't refuse to send us what we need? yeah it will hurt them, but it will hurt us more.

 

Yeah, but what about a Foundry, casting Plant. Then ship them here for machining, they do it on a lot of other metal products??...That's kinda been a problem for the most part, EXCELLENT designs, JUNKY materials = parts failures..

 

This is a good thing..


But one thing to keep in mind, something Eric was kinda touching on... Factory and research labs overseas don't necesesarily have to be shady labor shacks, using questionable methods and materials..

What worrys me more is when big corps look into putting up the next new state of the art R&D or factory up overseas..

I know of no easy answers though.. The best thing I've heard from a coworker (actually over in England) is:

"We can't simply just say we'll all work harder and smarter then the guys overseas in Russia or Asia... They can work just as hard and are just as smart as us... and for less pay! However, we can be prove that we're more agile and responsive towards the business's needs." Basically, we're easier to work with.


as long as US stays as the #1 major market for the business, so the business drivers stay US based...

 

My understanding of basic Chinese business law is minimal at best, but I believe that if you're setting up shop over there, it has to be a joint venture that's majority-owned by a Chinese company, and that any capital equipment must be less than 5 years old. In other words, if you build a factory over there, it'll be owned by the Chinese government and stuffed with shiny new equipment. Not a bad deal - if you're Chinese.

One of the reasons that our management has given as a possible reason for building parts in China is that it's too expensive to import them - not because of the manufacturing costs here in the US, but rather the 40% tariff that China puts on automotive components that are imported from the US. So US manufacturers reward this by making massive capital investments over there and importing a hundred billion dollars or so of product. "Free trade", my ***

Oh well - without all this massive trade imbalance, Asian banks wouldn't be able to turn around and loan our money back to the US government to cover the spending deficits and keep it afloat.

 

Off-topic: Pace check your PM.

This question also differs from the one in question, but as for china, does GM have any presence there? I ask because after reading about Toyota and how gloabalized they are (owning huge chunks in most major markets), GM and Ford would be left if in the dust if they didn't look to expanding in markets like Asia where we have little to no presense in in. Toyota alone selling 2+mill cars in Japan. And they're having their way with sales here in the states as well. That's one of the reasons why they're on Fords heels. Other than the current aquisition of Daewoo (korea), what does GM have in Asia???

 

VW's #1 in China with something like 30% of the market. Everyone else is fighting for second place, GM being one of the contenders.

The concern here is not building Chinese vehicles to sell in China, but rather the fact that they're adding so much capacity that they simply have to export parts from China just to keep the factories running, therefore meaning that we'll see a lot of parts rolling into the US from overseas even when it makes no financial sense to do so.

Oh well, it should be real interesting to watch the house of cards come tumbling down when China decides to float their currency. Right now, they tie it to the US dollar to keep Chinese goods cheap; if their currency floats, the price of Chinese goods here in America is going to jump quite drastically.

 

not being self sufficient is one of the biggest reasons why the south lost in the civil war. the north simply starved us. we dont want the US to have that disadvantage

 

Yea - how'd we win WWII? It wasn't the strength of our fast-food industry.

 

that was one of my points with regard to the chinese economy in the OZ FTA thread. except its probably not going to happen. china (the state) has way more to gain by keeping their currency devalued. they're going to use this to continue to spure economic development for years to come. so unless the dollar goes to the toilet (even more) their money is going to keep getting devalued.

that's another reason I was telling pacer that the 1 trillion dollar figure he sited didn't mean much. because it was in US currency.

right again.

 

I did, fire away.

prsce22@hotmail.com