TRANSCRIPT: A Report on the the United Auto Worker
nationwide walkout strike and whether GM plans
to build its new electric cars overseas in China;
A brief look at the Chinese auto sector; stock
markets update; and a huge new IPO...
Sinomania! Volume I Webisode 33, September 25,
2007
Workers of the World - Guard Your Turf!
The UAW Takes On China.
A Huge New IPO, Markets, and More!
A NEW CEILING FOR SHANGHAI?
Chinese markets continue to rally. The Shanghai
Composite Index reached new heights over the past
week and has not dropped below 5,400. The numbers
are much the same for the CSI 300 Index. B shares
are somewhat flat but continue up overall. I still
believe resistance is setting in and 5,500 appears
to be a new magic number for the Shanghai Composite
whether it goes much further remains to be seen.
Under new rules, China's Qualified Domestic Institutional
Investor (QDII) program allows Chinese to invest
in overseas stocks offered by domestic brokers
in alliance with foreign asset managers. Mellon
Asset Management, for example, this week launched
its Southern Global Enhanced Balanced Fund and
immediately sold over $2 billion US dollars in
shares. This is a new and interesting opportunity
in China's domestic market and heavy hitters such
as T.Rowe Price, JP Morgan, Fortis, Deutsche Bank,
and Societe General are possible players.
IPO REPORT
Another week, another record IPO! This week,
China Shenhua, mentioned in last week's show,
is not only the biggest IPO in China but the biggest
IPO of the year for the world passing Russia's
JSC VTB Bank that sold billions worth of shares
in May. China Shenhua attracted over a third of
a trillion US dollars in orders and could raise
just under $9 billion US dollars.
UAW TAKES ON CHINA
For years the UAW - the United Auto Workers of
America - appeared before the US Congress to bemoan
the loss of jobs in the auto industry to overseas
producers, primarily in China. For the past decade
the UAW cooperated with big American automakers,
took pay cuts, lost benefits, and joined car companies
in demanding Federal action on a litany of complaints
that it calls remedies for the collapse of the
American auto industry.
The UAW and Detroit expects the US government
to force Chinese currency appreciation, renegotiate
or abandon China trade agreements, and provide
outright protection to an industry that has over
the past generation failed its customers, its
employees, and its shareholders and investors.
But this week the UAW turned on its biggest employer
General Motors and called the first nationwide
walkout strike in a generation. 73,000 workers
in 80 plants owned by GM are striking not over
health plans or wages according to their union
president but over job security, specifically
whether GM will build its new electric car in
the United States or in China.
One of the first great industrial conglomerates
GM was the largest corporation in the world for
much of the 20th Century but now owns less than
a quarter of the market for new cars in the United
States, still by far the most important auto market
in the world. More than a decade ago, GM developed
a plug-in electric car that it perversely abandoned.
It now wants to reclaim that accomplishment and
is pinning its hopes on the Chevrolet Volt. In
fact, GM intends to make the Volt its global product
for the future.
The Volt was shown at this Summer's Shanghai
auto show just after being revealed in Detroit.
The key to GM's new electric car is the E-Flex
electrical system that can be used with different
powertrains to make a gas or diesel hybrid or
all electric car.
Not long ago, GM announced ambitious plans for
60,000 Volts in its first full year of production
slated for 2010. For perspective, it took Toyota
five years to get to that level of sales with
the Prius. At those numbers, GM hopes to sell
the Volt for $30,000.
How can GM get up and running with the Volt so
quickly? According to GM Product Planning Director
Benoit Schlumberger, the key to getting E-Flex
volumes where they need to be for full production
is the Chinese market. China, according to Schlumberger
is where interest in the E-Flex system is developing
fastest including use of the system with a hydrogen
fuel cell and he said GM expects to sell a larger
number in China.
GM this month announced its sales in China's
domestic market reached one million units for
the first time, a significant milestone. Last
week the Managing Director of GM China, Kevin
Wale, announced that GM was looking to build a
new research and development center in Shanghai
close to its huge joint venture operations and
factories with Shanghai Automotive Industry Corporation.
And just today, the US Department of Transportation
announced tentative approval to Northwest Airlines
for a direct Detroit-Shanghai route.
Indications appear that GM is looking to produce
the Volt or its equivalent most likely in China.
And the competition is heating up. The Miles Automotive
Group, a startup from California, is already importing
electric cars from China and hopes to introduce
a full size sedan model - the XS500 - by late
next year that will retail just over $30,000.
And Malcolm Bricklin, the famous auto impresario,
says he is still developing a plug-in electric
car and working with several Chinese manufacturers.
So where does this leave GM and the UAW? Both
want impossible concessions. How this standoff
plays out will have serious implications for the
US auto industry, for labor unions in America,
and for US-China relations. Watch the outcome
closely.
A BRIEF LOOK AT CHINA'S AUTO INDUSTRY
In 1979 Deng Xiaoping visited a GM assembly plant
in Atlanta that made as many cars in one day as
China made in a year. Then only the most powerful
Chinese owned a private car but a decade later
there were a million of them on the road in the
China and that number swells each year.
In 1991 the Chinese government declared the auto
sector a 'pillar industry' of the national economy.
Development has been focused on autos and related
infrastructure ever since. China is now the number
two vehicle market in the world after the USA.
Passenger car sales rose almost 40% last year.
China's first cars were made by companies in
Nanjing and Shanghai in the 1950s but those platforms
never took off. There are now 16 large automotive
conglomerates in China but the big three are First
Auto Works, Shanghai Automotive Industry Corporation,
and DongFeng. All have extensive joint venture
operations with American, European, Korean, and
Japanese car companies. There are also wholly
private companies that are making great strides
such as Chery.
