The long retreat of the US auto industry (David Fickling in blistering form)
Germany’s Carl Benz might have invented the automobile, but it’s the United States that got us to drive them. The relentless export of American cars and car culture put the world on the road in the 20th century. By the 1960s, Ford Motor Co. had plants in almost every major European country, as well as Argentina, Brazil, Egypt, India, Israel, Peru, Pakistan, South Africa, Turkey, and Zimbabwe. Right now, it’s passing that baton to China with barely a fight. The US car industry that emerges will be smaller, less influential — and, eventually, less profitable and financially sustainable. The immediate question is over the fate of General Motors Co.’s Chinese units, mostly joint ventures with SAIC Motor Corp. That company, controlled by Shanghai’s city government, is best-known internationally for reviving the storied British MG brand with a range of affordable, export-oriented SUVs and hatchbacks. It’s no secret that these ventures are struggling. A decade ago, equity-accounted income from China made up more than half of GM’s net profit, but in the first nine months of this year they racked up a $347 million loss. “It’s a difficult market right now,” Chief Executive Officer Mary Barra told investors in July. “Very few people are making money.” Chevrolet sales have fallen off a cliff, and are likely to end the year barely scraping 10% of the level they were at in 2019. Cadillac isn’t doing much better. Even Buick — which in China has substantial brand cachet as the chosen marque of independence leader Sun Yat-Sen and Mao’s longtime premier Zhou Enlai — is barely keeping its head above water. Things are better with local brand Wuling, whose tiny electric vehicles cost about $8,000, but Baojun, GM’s other local JV model, also appears to be circling the drain. Barra has long reaffirmed her commitment to China, but the outlook has rarely looked bleaker. GM and SAIC are locked in meetings through the end of the year to restructure their holdings to make them profitable. … A middle path would be to follow Ford and Chrysler-owner Stellantis NV, and re-establish the business as one where the Chinese company manufactures cars, and the foreign partner exports them to lower-cost markets such as Southeast Asia and Latin America. SAIC, however, is already working hard building its own international distribution networks. It’s recently started sponsoring English soccer club Arsenal, as well as leading clubs in the French and Saudi Arabian soccer leagues, and an Australian rugby league team. Besides, turning GM into a glorified car dealership hardly looks like a route to sustainable profits. Either option, moreover, will mark another nail in the coffin of American soft power. When Detroit had its last brush with death in 2009, about two-thirds of GM and Ford’s combined sales were outside the US. With China sales dwindling, we’re approaching the point where two-thirds will be in the US, instead. The American car industry is turning inward again for the first time in a century. Detroit got the world on the road. BYD will inherit the earth.
Source: Bloomberg