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Tuesday, November 07, 2006

GM In China Town

Stocks: (GM)(F)(TM)(HMC)

What is it about China? European and American car executives think that if they say the name of the country in the same sentence with the names of their companies, their stocks will immediately go up 5%.

GM's CEO says that his company is getting bigger in China. GM is going to build more cars and components there. It would make sense given how much less expensive the labor is that the UAW-brand workers.

Now, of course, Ford, Toyota, Honda, VW, and several other large car companies have the same aspirations for China, so it is starting to look like North America in terms of competition. This does not even factor in the local car companies who may have an edge because of the tendency of the Chinese government to favor the home team.

Leaving aside all of the excitement about China, GM is still in deep trouble in it home market. Its share in the US seems to be stable now at about 25%. But, with it program to cut annual costs by $9 billion still not complete and concerns that the UAW may not sacrifice warm bodies forever, GM still has a long way to go.

In addition to GM's own problems in the US, Toyota continues to accelerate its effort to take market share from the Big Three. The big Japanes car-maker said it will open its seventh plant in North America within the next two years. The last anyone looked, GM was not opening any plants in Japan.

GM can't win in China if it stands on feet of clay in the US.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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