Fritz Henderson: We Depend on China!

Fritz Henderson, who took the place of Wagner to become the CEO of General Motors (GM) in April 2009, finally came to visit China to give out his opinions in the Hummer acquisition and importance of the Chinese market.

On October 13, GM CEO Fritz Henderson arrived in Shanghai to start his first visit in China after he took his post. When interviewed by the Shanghai media, Henderson gave out his own opinions about selling Hummer to China-based Sichuan Tengzhong, saying that selling Hummer to Tengzhong was determined by bidding. GM was satisfied with the price and would support Tengzhong in the adjustment of the power system of Hummer. He also believed that such a deal will be undoubtedly approved by the Chinese government. He added that GM will introduce more new vehicles into the Chinese market at a faster pace.

      Fritz Henderson                                                  Nick Reilly

Bleak Outlook for Hummer

According to the agreement, Tengzhong acquired the ownership of Hummer’s brand, trademark and name. Simultaneously it got the using rights of the patent to produce Hummer vehicles. Then the buyer should take over the distribution agreements of Hummer. Previously, GM priced Hummer at 500 million US dollars. Before the confirmation of this deal, it was reported that the final offering was 150 million US dollars. Henderson said: “Sorry that I can not tell the exact price before the approval of this deal.”

The final agreement enabled the both sides to advance to the relevant examination and approval process. Henderson said that the deal will take effect after the accomplishment of the general transaction conditions and the approvals of the Chinese and US government departments. He denied that he had the plan to talk about this matter with the Chinese government during his visit.

The analysts in China are worried about the operation of Hummer in the future due to the unknown direction of the intellectual property right and the allocation of the research and development team. Wang Liusheng, an expert in vehicle, doubted whether Tengzhong can afford the 150 million US dollars and whether its operating ability is OK.

It is known that Tengzhong, with the registered capital of only 300 million yuan (USD 42.93 million), is specialized in producing oil devices and road construction machines. In 2008 its output value was 1.57 billion yuan (USD 229.91 million) and the amount of submitted tax reached 20 million yuan. According to the agreement between GM and Tengzhong, GM is entrusted to provide Hummer with the assembly of vehicles, key components and related business service during a contracted period. Two US-based assembly factories under GM will continue to play their roles of sub-contractors for Hummer till June 2012, after which they have the right to decide whether to extend the contract for another year or not. The deal can retain 3,000 positions of manufacturing and selling Hummer vehicles in the USA, but it will keep Hummer from being made in China for a while. Henderson didn’t talk about the plan of when to have the Hummer vehicles completely manufactured in China, only saying that GM will support Tengzhong in integrating Hummer’s businesses in the USA and the improvement of the Hummer vehicles.

The Chinese Market Is Too Important

During his visit in Shanghai, Henderson thought highly of the increasing sales amount of GM vehicles in China. He said: “What’s interesting is that the sales of GM in China this year is even better than in the USA. The Chinese market is too much important for GM.”

According to Henderson, in September 2009, GM sold 180 thousand units in China, which broke the previous record. In the first three quarters of this year, GM and its joint ventures in China saw 1.29 million units be sold in China, up 55.6% from last year, which also hit the historical high.

Henderson said: “GM China is an important part of GM and we will never give up the advantages we have in China.”

Nick Reilly, president of GM Asia & Pacific, said that there is a strong demand for the assembled vehicles, components, research and development in China. Shanghai may become the frontrunner in the electric power autos and hybrid vehicles.

“China may undergo faster development in small-sized electric power vehicles than any other country in the world,” said Nick Reilly.

According to Henderson, GM will introduce five new models at the beginning of 2010 and 30 new kinds of vehicles will come out in the next five years, including the electric power vehicles and hybrid cars.

Meanwhile, he said that moving the headquarters of GM Asia & Pacific from Singapore to Shanghai was a coincident but conformed to the development trend.

“The Chinese market can help us further improve our production and research and development ability. Therefore, we believe that it is quite rational to set up an international operating center in Shanghai,” said Henderson. “The Chinese market is so important for GM,” he repeated.

This was the first time that Henderson showed up in China and also his first time to be interviewed by the Chinese media after the restructurings of GM. He never hid his joy and excitement to visit China.

Apart from thinking highly of the sales amount in China and repeating the words “the Chinese market is too much important for us,” Henderson also praised the achievements of Shanghai GM Pan Asia Design Center in recent years and confirmed the news that the new Sail will be developed by this center independently. It is said that the new car will be available at the beginning of 2010.

“Shanghai will be more and more important for our research and development. The products developed here will not only be seen in the Chinese market. They will be spread and sold in the other countries,” said Nick Reilly.

GM has not completely gone out of the troublesome situation at this moment, but it has laid more and more emphasis on the Chinese market. Henderson said that the main purposes of his visit in China were to know better about the development of GM vehicles in China, to communicate with the Chinese partners and government and to ensure the smooth development of GM in China.

China to Be a Center of Small Cars

Henderson also told the media about the future development strategy of GM in China. The primary task is to add the investment in the Chinese market, including the establishment of the new joint ventures of commercial vehicles, new GM branch company in China and the international operating headquarters. Meanwhile, GM will invest in founding and developing the Shanghai GM Center of Research, Development and Test and the China GM Academy of Science. GM will also take part in the World Expo 2010 and launch the OnStar information technology service for the newly-introduced and coming-in-the-future vehicles in China.

The great potential of the Chinese market is the source of GM’s confidence. The 55.6% year-on-year growth of sales amount in China in the first nine months is amazing. In Shanghai, GM saw a 40.4% increase in the sales amount till the middle of October. Compared with the prosperity in China, GM had a pale performance in the US market. It is known that the GM only took 19.5% market share in the USA in the first three quarters of this year, almost equal to the data of the first half year. Internationally, GM took 11.9% of the market share, up 0.3 percentages from the first half of this year.

That’s why GM will place China in the No.1 position in the future as mentioned by Henderson. More innovations will happen to GM in China. The research and development in this country will focus on the vehicles with small emission amount.

As he said, the new Chevrolet Sail which will be sold in the Spring Festival next year is specially designed for the Chinese consumers. The new car is believed to have great potential in the other emerging markets. The experts thought that it indicated that China is competent to be the manufacturing and exports center of GM’s small vehicles.

Nick Reilly, who took charge of the newly-founded international operating center of GM at the end of September emphasized that the cars made in China is very important for the emerging markets. Even the made-in-China cars and offset the shortcomings of the cars made in the USA. These cars can not only be sold in China, but also be exported to the other countries.

After the restructuring, GM maintained its four core brands of Chevrolet, Buick, Cadillac and GMC. It has founded a joint venture of light commercial vehicles with China-based First Automobile Works, but according to Henderson, presently GM has no plan to bring the GMC vehicles in China.

In the future, China will be an important base for the GM’s new energy vehicles. Now, GM has already introduced two kinds of hybrid cars in China and is planning to introduce the Chevrolet Volt electric vehicles. In Nick Reilly’s opinion, China will be the frontline of developing the electric cars and Shanghai will be the original place of the relevant technologies.