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GM Downplays Challenge to China Business

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GM Downplays Challenge to China Business


General Motors Corp.'s partnership with China's SAIC has helped it win an enviable edge over its global competitors in this sizzling market.

That alliance has also helped transform SAIC (nyse: SAI - news - people ), a former tractor factory, into a fledgling automaker in its own right - with car models that are competing directly with GM's across the spectrum.

But GM's not worried, says the company's China president, Kevin Wale.

"We've always known that SAIC would develop their own brand. We have spoken of it since we began our joint venture car company," Wale said in an interview Friday. "It's not a surprise to us."

The partnership between GM and Shanghai Automotive Industrial Corp., or SAIC, resulted from government policies requiring foreign automakers to create joint ventures with local partners as a condition for setting up shop in this potentially huge market.

Beijing's plan all along has been to develop a globally competitive local industry.

"SAIC has a responsibility to develop its own brand. We understand and accept that," Wale said. "We're also confident that our brands and the success of our joint ventures are very important to SAIC."

GM set up its first factory in Shanghai in 1998. At the time, it was a latecomer, trailing behind German rival Volkswagen AG, which began making cars in Shanghai with state-owned SAIC in the mid-1980s, and Chrysler, which partnered with Beijing Automotive.

GM has more than caught up by now. It now operates seven joint ventures and two wholly owned foreign enterprises in the country. Along with five vehicle factories and one engine plant, the company has also launched an auto financing venture and a chain of dealerships.

Its China sales last year rose 32 percent to 876,747 vehicles, with joint venture Shanghai General Motors Corp. (nyse: GM - news - people ) becoming China's top-selling domestic automaker with 365,400 vehicles sold.

GM saw its market share rise to 11.8 percent last year from 9.4 percent the year before, despite aggressive expansions by local competitors like Chery Automobile Co., and foreign rivals.

Wale would not give a figure for its projected market share going forward. But he was emphatic about GM's determination to grow faster than the market. Sales of passenger cars in China jumped 37 percent last year to 3.8 million units, making this the world's third-biggest passenger car market. Including trucks and buses, China is the world's No. 2 vehicle market behind the U.S.

"In the future, as we expand our car portfolio, there may be some conflict," SAIC's chairman Hu Maoyan, told reporters Thursday. But with the market growing at an annual rate of over 30 percent a year, there's still "space for both our own brands and joint venture brands," he said.

SAIC acquired a major asset when GM's president for China, Phil Murtaugh, quit in 2005, only to join SAIC a year later. Wale, a former vice president for GM Europe and one-time head of the company's Asia Pacific operations, succeeded Murtaugh.

Murtaugh's status at SAIC is "not a problem" for the companies' partnership, Wale said.

"Phil's still a great friend to General Motors. I'm sure he still has a huge soft spot for GM," he said.

SAIC is China's biggest publicly traded auto company. Cash-rich from surging sales at its joint ventures, it also has strong government backing for its plans to build up its own-brand models across the entire vehicle spectrum.

The company had no SAIC-brand passenger cars of its own until it recently launched the Roewe, a sedan developed from technology purchased from MG Rover. On Thursday, SAIC chairman Hu Maoyan said his company was keen to cooperate with rival Nanjing Automobile (Group) Corp., which bought most of the bankrupt British company's assets in 2005.

Wale said GM was confident of its strong position in the China market, where it has expanded its vehicle range to include Cadillacs at the high end and minicars from a joint venture, SAIC-GM-Wuling, at the low end.

"We have a great product development capability. We have a great multibrand strategy. We have a great sales network," Wale said. "If we continue to focus on those fundamentals, we're going to do great in China."

Still, GM faces a challenge from both domestic and foreign competitors, like Toyota (nyse: TM - news - people ), which are aggressively working to expand sales and production.

Last year, Japan's leading automaker saw its China sales jump 68 percent to 308,000 units after it launched its popular Camry model. Ford Motor Co. (nyse: F - news - people )'s vehicle sales in China surged 87 percent last year to 166,722 units.

"There's a lot of great companies out there. They're all after the same prize and we've got to compete with them every day," Wale said.

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"We have a great product development capability. We have a great multibrand strategy. We have a great sales network," Wale said. "If we continue to focus on those fundamentals, we're going to do great in China."

....And for some odd reason, this just is not working in America right now and two more words after reading that article: Chinese Buicks..

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