China and U.S. OEMs

When Ford announced its 3^rd quarter earning on October 24, the official announcement said, in part, “Company revenue was up 3 percent year over year, with net income and company adjusted EBIT both down year over year, primarily driven by continued challenges in China.”

The previous day, perhaps as a preemptive move to answer the question “If things are going poorly in China, what are you doing about it?, Ford announced that it was establishing Ford China as a stand-alone business unit.

Jim Hackett, Ford president and CEO, said, “Success in China is critical as we reposition our global business for long-term success.”

Today General Motors announced its 3^rd quarter earnings. In its announcement it said it had achieved “profitability in all segments” and “GM China equity income and GM Financial EBT were third-quarter records.”

Baojun RS-5 from the SAIC-GM-Wuling joint venture

Of China, GM stated, “Despite challenging market conditions, GM China achieved record third-quarter equity income, driven by a strong mix of vehicles in popular segments, led by record Cadillac sales and strong Chevrolet deliveries.” (People at GM Headquarters, for example, probably can’t remember the last time Cadillac had record sales in the U.S.)

The point is: China is clearly exceedingly important to the fortunes of the two U.S.-based OEMs.

And don’t take my word for it. According to Jim Farley, Ford president of global markets, “China is absolutely essential for Ford’s profitability and growth.”

Note these words carefully: “absolutely essential for Ford’s profitability and growth.”

Farley isn’t talking about Ford in China. He is talking about Ford, period. It affects every person who works at Ford or a Ford supplier, as well as every person who happens to have a 401k with investments in Ford.

China is similarly important to GM.

Too bad some politicians in Washington don’t understand how the global automotive business works in the 21^st century.