An­a­lyst: GM re­call un­likely to af­fect China

De­spite woes, au­tomaker set to sell over 3 mil­lion cars this year

China Daily (Canada) - - ACROSSAMERICA - By JACK FREIFELDER in New York jack­freifelder@chi­nadai­lyusa. com

Gen­eral Mo­tors Co’s re­call of more than 3 mil­lion cars due to a de­fec­tive ig­ni­tion switch that it said was made in China won’t af­fect GM’s op­er­a­tions in China, ac­cord­ing to an an­a­lyst.

“Maybe GM won’t buy an­other ig­ni­tion switch from a Chi­nese sup­plier, but that’s not the end of the world,” said David Whis­ton, a se­nior eq­uity an­a­lyst with Chicago-based in­vest­ment re­search firm Morn­ingstar Inc, in an in­ter­view with China Daily.

Whis­ton, who cov­ers the Detroit-based au­to­mo­bile maker for Morn­ingstar, also said GM would sell “well over” 3 mil­lion cars in China this year. “GM China is still gen­er­at­ing a lot of profit for the com­pany, and it’s grow­ing at a re­ally healthy clip,” he said on Wed­nes­day.

So far this year, GM has re­called more than 20 mil­lion cars world­wide. In Fe­bru­ary, GM cited more than 2.5 mil­lion cars that needed to be taken off the road be­cause of sim­i­lar ig­ni­tion switch is­sues that re­sulted in the deaths of 13 in­di­vid­u­als.

The com­pany’s most re­cent re­call on June 16, which can be linked to eight non­fa­tal crashes, is re­lated to a faulty ig­ni­tion switch that can shift out of the run po­si­tion while the car is still in mo­tion, cut­ting off ac­cess to steer­ing and brak­ing ca­pa­bil­i­ties.

A GM spokesman said the com­pany is “in the process of deal­ing with the re­call,” and could not com­ment fur­ther.

Don Dion, chief in­vest­ment of­fi­cer for DRD In­vest­ments LLC, a Florida-based hedge fund, told China Daily that over the last 10 years prod­ucts com­ing out of China have been by and large good prod­ucts.

“I don’t think this prob­lem can be blamed on the Chi­nese com­pany. They cer­tainly have some of the blame, but I don’t think this is a China prob­lem; it’s a GM prob­lem,” he said.

Dion also said he does not see much of a shake-up as a re­sult of the safety is­sues.

“With more and more cars be­ing sold in China, the fo­cus for GM will be on mak­ing sure things are tested and re­viewed bet­ter,” Dion said. “I don’t think you’ll see less auto parts made in China be­cause the US in­dus­trial sec­tor is very de­pen­dent on China for parts.”

GM’s op­er­a­tions in China in­clude two for­eign en­ter­prises, 10 joint ven­ture part­ner­ships and more than 50,000 em­ploy­ees lo­cated in the world’s sec­ond-largest econ­omy.

Due to Chi­nese govern­ment reg­u­la­tions, for­eign man­u­fac­tur­ers pro­duc­ing ve­hi­cles in China must do so as a joint ven­ture with a Chi­nese com­pany. How­ever, only a limited num­ber of part­ner­ships are per­mit­ted.

GM has part­nered with SAIC — for­merly known as the Shang­hai Au­to­mo­tive In­dus­try Corp — to be­come one of the leading for­eign car com­pa­nies in China.

Through the first five months of 2014, GM and its part­ners sold a record­set­ting 1.47 mil­lion units in China, an in­crease of 10.7 per­cent year-on-year.

Dion said the re­call is­sue could pay some div­i­dends down the road.

“One of the pos­i­tives that could come out of this is that GM’s prod­ucts may con­tinue to get bet­ter,” he said. “The fo­cus will be more on the fu­ture and about mak­ing sure things are tested and re­viewed bet­ter. That’s go­ing to give the mid­dle man­age­ment group a lot more con­fi­dence to speak up when there is a prob­lem.”

Dion said GM CEO Mary Barra de­serves some credit for her open­ness and trans­parency in han­dling GM’s re­call, say­ing she has been “very open and trans­par­ent” on the ig­ni­tion is­sue.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.