GM's "thinning" will increase China's procurement of Chinese parts companies to benefit
General Motors CEO Mary Barra (not Wagner, as the original text incorrectly states) unveiled the latest "Survival Plan" on Monday (U.S. time), revealing that by 2008, the company will close nine automotive assembly plants and three service and parts facilities, while laying off 30,000 employees. The plan aims to cut costs by $7 billion. According to sources in China, this restructuring is not expected to significantly impact GM’s operations in the country. In fact, it could be a long-term benefit for Chinese auto parts companies, as it may lead to increased exports of components from China.
The North American business remains in trouble. The new strategy will reduce GM’s global workforce by about 9%, and annual vehicle production in North America will drop to 4.2 million units, down from 5.2 million. The layoffs have sparked strong reactions from the United Auto Workers union, which criticized the plan as unfair and disappointing. This could complicate future negotiations between the union and GM. Additionally, Delphi, a major supplier currently under bankruptcy protection, remains a critical link in GM’s supply chain. Delphi is seeking court approval to extend contracts with suppliers, and if this fails, it could force production shutdowns.
While announcing the layoffs, Barra insisted that GM's financial health is stable and that the company is not worried. However, GM is still considering selling its controlling stake in GMAC, its financial services subsidiary. This move, however, has proven more complex than initially anticipated. A GM spokesperson, Toni Simonetti, said that no official timeline has been set for the sale, and discussions are ongoing with potential buyers.
For Chinese auto parts companies, the "Survival Plan" could bring long-term benefits. Xu Xiaopeng, executive director of CAP (China) Automotive Parts Americas, Ltd., noted that the high labor costs in the U.S.—up to $2,000 per car—have contributed to GM’s financial struggles. He believes that this will push GM and its suppliers to increase sourcing from China. In fact, this trend is already visible.
According to reports, GM plans to shift more production to low-cost regions outside North America. However, Xu Xiaopeng suggested that China might not directly benefit from this shift, as most of the closed plants serve the U.S. market. Canada and Mexico are more likely to gain from this relocation due to their geographical advantages.
A GM (China) insider stated that sales in China remain strong. In the first three quarters of this year, sales rose by 27.8% to 472,495 units. Some Chinese suppliers that support the North American market may feel the impact of this plan. Wang Yuxing, Marketing Director of China Auto Parts Network, mentioned that GM North America purchases around $2.5 billion worth of materials from Chinese suppliers annually, and this number is growing. However, most of these companies operate in the after-sales market, while those supplying complete vehicles often work with OEMs that do not directly support GM. As a result, they may face reduced production and operational challenges.
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