GM's "thinning" will increase China's procurement of Chinese parts companies to benefit
General Motors CEO Mary Barra (note: original text says "Wagner," but this is likely a mistake, as the current CEO is Mary Barra) unveiled the latest "Survival Plan" on Monday (U.S. time), revealing that by 2008, the company will close 9 automotive assembly plants and 3 service and parts facilities, while laying off 30,000 employees. The goal is to cut costs by $7 billion. According to sources in China, this move won’t significantly impact GM’s operations in the country. In fact, it could be beneficial for Chinese auto parts suppliers in the long run, as GM may increase its reliance on Chinese manufacturing.
The North American division continues to face challenges. This restructuring is expected to reduce GM’s global workforce by around 9%, and annual vehicle production in North America will drop to between 4.2 million units. The layoffs have drawn strong criticism from the United Auto Workers union, which called the plan unfair and disappointing. This could complicate future negotiations between the union and GM. Meanwhile, Delphi, another major supplier currently under bankruptcy protection, remains a concern. If Delphi fails to secure timely parts, it might have to halt production, creating more instability.
Despite the cuts, Barra stated that GM's financial position remains strong. However, the company is still considering selling its stake in GMAC, its financial services subsidiary. The sale, however, has become more complicated than expected. A GM spokesperson confirmed that no timeline has been set yet, and discussions with potential buyers are ongoing.
For Chinese auto parts companies, the new plan could bring long-term benefits. Xu Xiaopeng of CAP (China) Automotive Parts Americas noted that high labor costs in the U.S., such as $2,000 per car in worker benefits, contributed to GM’s financial struggles. This will push GM to source more parts from China, and this trend is already visible. However, direct benefits for China may not come immediately. Most of the production shifts are aimed at low-cost regions like Canada and Mexico, which are better positioned geographically.
GM China reports strong sales performance, with a 27.8% year-on-year increase in the first three quarters, reaching 472,495 units. Some Chinese suppliers supporting the North American market may feel the impact. Wang Yuxing of China Auto Parts Network mentioned that GM North America purchases about $2.5 billion in parts from China annually, and this number is growing. However, most of these companies focus on the maintenance market, while those involved in OEM services for other manufacturers may see reduced orders. Overall, the shift in production could create both challenges and opportunities for Chinese suppliers.
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