[A-List] Why this funky cheap ride is worth a fortune to GM

["Charles Brown" <cbrown@xxxxxxxxxxxxxxxxx>]

Why this funky cheap ride is worth a fortune to GM


April 19, 2007

BY KATIE MERX

FREE PRESS BUSINESS WRITER

LIUZHOU, China -- Yes, the Wuling Sunshine is bigger than a breadbox.

General Motors Corp. and its Chinese joint venture partners count on big
sales of relatively tiny vehicles -- especially the mini-minivans dubbed
breadboxes -- assembled in southern China to further spur the Wuling brand's
growth and profits in the world's fastest-growing vehicle market.



	
In Liuzhou, an industrial city of 1.6 million more than 1,200 miles
southwest of Shanghai near the Vietnam border, GM, together with its
partners Shanghai Automotive and Liuzhou Wuling Motor Co., builds spartan
minivans and pickups sold under the Wuling badge. Elsewhere in China, Wuling
manufactures the Chevy Spark.

The most popular Wuling vehicles are the mini minivans -- the Sunshine, the
New Sunshine and the recently launched, so-called luxury Wuling Hongtu -- it
builds in Liuzhou. Categorized as mini commercial vehicles, or small work
trucks, their prices start at $3,500 and they get better than 40 miles to
the gallon in the city.

A high-end Hongtu with a 1.5-liter engine can sell for as much as $6,800
with all the bells and whistles, including an optional air bag.

"We think we are providing to the customer a transportation tool that is
low-cost, multipurpose -- and they are pretty good quality and can be used
under tough conditions," said James Hu, director of mini commercial vehicle
marketing at Wuling.

The Chinese call the vans breadboxes, because of their simple box-like
appearance.

The vans are incredibly popular. Last year, the Wuling brand sold 420,140
vehicles to capture 37.3% of the mini commercial vehicle market, up from the
30.6% of the market it held in 2005 when it sold 310,288 mini commercial
vehicles.

Its next-closest competitor, domestic automaker Chang An, holds about 15% of
the market, Hu said.

In fact, the mid-level Wuling minivan -- the Sunshine -- was the
best-selling vehicle in all of China last year, with sales of 292,400, Hu
said.

In the first three months of this year, Wuling's market share in the mini
commercial segment rose to 46.6 million.

Hu and Shanghai GM Wuling Vice President and CFO Thomas Drumgoole declined
to comment on full-year expectations. But others at the automaker have
speculated that the mini vehicle maker will sell about 500,000 vehicles this
year. Drumgoole said his objective for 2010 is to hold more than 35% of the
segment.

Tim Dunne, director of Asia-Pacific Market Intelligence for J.D. Power and
Associates, said the Wuling vehicles are very popular in the countryside.

"They're utilitarian," Dunne said. "You can move six to eight people around
with them. You can use them as work vehicles. They're cheap to buy and cheap
to repair."

And in a market where the vast majority of buyers will pay cash and use the
vehicles for hauling goods or business associates during the week and for
carrying family -- parents, in-laws and children -- on the weekend, those
are all attractive attributes, GM executives and analysts agree.

Hu said the average age of Wuling buyers is under 40 with a high school
education. Four out of five are first-time car buyers. And their average
monthly income is under 1,500 yuan -- about $200 -- meaning the cheapest
Wuling model costs a year and a half of income.

Because personal vehicle ownership in this vast, nominally communist nation
is basically only 7 years old -- and based primarily in the more properous
coastal regions -- 80% of vehicle sales across the board have been to
first-time buyers.

It's quite a contrast to the United States, where most adults own vehicles.
In China, less than 1% of the population owns vehicles.

So Wuling focuses on growing sales in rural villages and small towns of
China, where it sees massive opportunities for growth in the sales of its
tiny vehicles. On China's scale, Wuling defines villages as locations with
populations of 5,000 to 10,000. It defines as a small town any city with a
population of 200,000 to 500,000.

The model for Wuling is "low-cost and high-value production," Wuling
President Shen Yang said Wednesday through a translator.

GM executives say that, while it is credited with bringing engineering
expertise to the partnership, Wuling has taught GM how to balance the use of
automation with human labor to protect the slim margins typical of small
cars.

While adding little automation over the last four years, Shen said, Wuling
has reduced the number of labor hours it takes to build a vehicle by 37% and
cut its costs per vehicle by nearly 60%.

Most of the assembly of Wuling vehicles is not automated, to keep costs
down.

Shanghai GM Wuling executives said the total cost of labor including
benefits is less than $4 per hour per person in Liuzhou, where the company
employs about 10,000 workers.

Five hundred of those workers are at the new Liuzhou engine plant, which
plans to launch production in August building up to 250,000 engines for the
mini vehicles. Said GM China President Kevin Wale: "Our aim is to stay ahead
in this critical market for General Motors by offering local consumers the
products and services that they want, when they want them."

And Wuling sees itself filling a big role on the modest end of consumer
desires.

Said Shen, through his interpreter: "We have words in our vision to be the
best small and mini vehicle maker in the Chinese market."

Contact KATIE MERX at 313-222-8762 or kmerx@xxxxxxxxxxxxxx

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________________________________

Drackoe

GM seems to be partial ceding the US market. Thats smart. This market has
developed an anti-domestic bias that won't be a hurdle in the developing
Chinese market.

Posted: Thu Apr 19, 2007 2:56 pm

________________________________

cranial

Lets bring them over and sell them at Sams club. They would be a big hit
here. Just think, a car you could buy new every year if you wanted to. If GM
could only build the rest of the cars they sell here over there, everyone
could afford a new car. And we could take our hard earned money to a real
bank instead of the uaw job bank. Rolling Eyes
<http://forums.freep.com/images/smiles/icon_rolleyes.gif> 

Posted: Thu Apr 19, 2007 1:31 pm

________________________________

dadcss

A few lines from the article that stood out to me. 

.the cheapest Wuling model costs a year and a half of income. 

.their prices start at $3,500. 

.Wuling has taught GM how to. 

If Wuling has taught GM anything it's how to sell an ugly vehicle to the
masses for 1.5 years wages. I put that at $150K in UAW wages. 

Let's hold our breath and see how many are still on the road at 50K miles.

Posted: Thu Apr 19, 2007 12:28 pm

________________________________

maotiki

I HAVEN'T BEEN READING THESE MESSAGES FOR LONG, BUT I AM AMAZED AT THE
ANTI-U.S. AUTOMAKERS MESSAGES POSTED HERE. AS TO THE COMMENT ABOUT THE "NEW
PONTIAC AZTEK", I JUST WISH TO INFORM YOU THAT MY 1977 PONTIAC GRAND PRIX
(WHICH FALLS UNDER THE TIME SPAN MENTIONED AS "GM HAS BEEN MAKING JUNK SINCE
THE '70's) IS STILL MY DAILY DRIVER AND IT HAS NOT HAD ONE MAJOR BREAKDOWN
AS OF YET. NOW, FOR A 30 YEAR OLD CAR I'D HAVE TO SAY THAT THIS ONE, AT
LEAST, IS NOT "JUNK"., AND BOY DOES IT GET ADMIRING LOOKS AT EVERY RED
LIGHT!!!

Posted: Thu Apr 19, 2007 11:26 am

________________________________

oldtigerfan

Ladies and gentelmen, General Motors is proud to unveil the all new 2008
Pontiac Aztek. Smile <http://forums.freep.com/images/smiles/icon_smile.gif> 

Posted: Thu Apr 19, 2007 9:07 am