GM and GE Go All-In for Chinese Subsidies

National Legal & Policy Center ^ | September 26, 2011 | Paul Chesser

[jazusamo]

Professional subsidy-sucking General Motors, which seems content to marinate in its taxpayer "investment" indefinitely, is getting ambitious. No, not in the sense of paying backthe $50 billion U.S. government bailout, or in producing vehicles people actually want to buy, but instead in finding other governments to subsidize its products.

Not surprisingly the new partner - in a 50-50 joint venture with the state-run auto industry - is China. And also unsurprisingly, General Electric will join GM in a related partnership in the communist nation.

And you probably already guessed the agreements surround the development and sales of electric vehicles. But GM took great pains to emphasize that it does not have an ambitious plan in the Peoples' Republic for the Chevy Volt - whose sales have been a dud in the U.S. - because it is not allowed to take advantage of generous Chinese government subsidies for electric vehicles, because the Volt (and also Nissan with its Leaf) are produced outside the country.

Instead, in order to be able to grab the eye-popping $19,300-per-car incentives, automakers must share their technology with Chinese counterparts and produce the vehicles over there. So we now have the GM China Advanced Technical Center in Shanghai, adjacent to the company's local headquarters and in a 50-50 partnership with Chinese state-run SAIC Motor Corporation. And rather than call it the Volt, the combined venture will likely develop and implement the electric technology in the Shanghai GM Chevy Sail model, which was introduced late last year. According to The Economic Times:

The agreement finalizes a nonbinding memorandum on cooperation for green-vehicle development SAIC and GM signed last November. At the time, SAIC agreed to buy a 1 percent stake in GM through an initial public offering held to make GM a public company again and cut the U.S. Treasury's stake in the company.

In addition, the New York Times reported this week that "G.M. holds minority stakes in manufacturing joint ventures in China that sell more cars each year than G.M. sells in the United States. Of the move to jointly advance technology, GM vice president Stephen J. Girsky told the newspaper, "This is not a political decision today. It's a business decision." Undoubtedly it's both.

Meanwhile, as has been forecast many times by NLPC's Mark Modica, GM is unloading a number of the worthless Volts on General Electric for use in China, it was announced Thursday. In addition, GE will install a number of charging stations (also certain to be subsidized) "at a government-assigned international EV demonstration zone in Shanghai's Jiading District and at the GM Headquarters office in the city." That will put a token number of Volts on the road in China ( just like in the U.S. ) to make it look like GM isn't just after a naked grab of government subsidies - at least until the joint venture produces its electric Sail or other qualifying vehicle. As for GE's motivations, Associated Press reported:

GE builds natural gas-fired generators for utilities, electric motors, advanced electric meters and electric car charging stations, all of which could be in higher demand if drivers buy electric cars. The company estimates the expanding market could bring it up to $500 million in revenue over the next three years.

The charging station installations replicate the infrastructure build-up efforts in the U.S., via grants from the Department of Energy , which subsidize the costly chargers for GE and other companies.

What a shame that once-proud U.S. companies like GM and GE have developed such short-sighted leadership that elevates their hunger for short-term cash over long-term viability and credibility, that is self-sufficient and not dependent on taxpayer dollars. GM has been drawn so deep in the muck that one of its iconic models, Cadillac, wasimplicated in the endorsement of a Chinese propaganda film that celebrated the 90^th anniversary of the Chinese Communist Party. While the company's U.S. operations denied involvement with the project ("It is not GM. It is not GM money. And it is in no shape or form, or indirectly, taxpayer money"), the fact is that production company - China Film Group - felt cozy enough with GM to plaster its Cadillac logo on background endorsements at the film's premiere.

As John Hayward of Human Events explained, China Film Group even filmed a Cadillac commercial in Los Angeles, credited to "Cadillac Film Group," and ended with the Cadillac logo. "It makes that ten-foot-pole separating GM from the China Film Group look awfully flimsy," Hayward wrote.

Now watch: the next round of whining you will hear is how U.S. electric vehicle manufacturers can't compete, just like the solar industry, because of China's massive subsidies to their EV industries. And the environmentalists and government handout hogs will cry for more U.S. government "investment," lest the Solyndra-like companies fail and the precious "Green jobs" (of the future!) are destroyed.

Paul Chesser is an associate fellow for the National Legal and Policy Center and is executive director of American Tradition Institute .

[Cringing Negativism Network]

Commence the trade war.

It’s going to happen. Might as well be on our terms for a change.

[molson209]

what happens when China becomes mad at the USA , where do you get all your cars, computers , trains etc etc ?

[jazusamo]

Earlier posted article by Mark Modica on this subject:

Taxpayer Funding of Chevy Volt to Create Jobs – In China

[GraceG]

Well GM could get subsidies from the USA, but that is still money from China, so GM is now “cutting out the subsidy middleman” that is the US government.

Uncle Obama will not be pleased....

And now China will gain more tech secrets....

We seem to be a monumentally stuipid people in letting this sorta thing happen, of course because GM is addicted to subsidies, it was only a matter of time before they went directly to our trade rival for their “fix”.

[Lazlo in PA]

This just goes to show that companies like GE and GM have been trained to respond to Socialism. Dangle a few bucks in front of them and no matter what strings are attached, they will come running. Obummer or the Chinamen, they are all the same to these companies.

[nascarnation]

what happens when China becomes mad at the USA , where do you get all your cars, computers , trains etc etc

Without the US consumer market, the Chinese economy is in big trouble, likely leading to massive social unrest and a bad outcome for those in power. So they can be "mad" but doubt they will stop producing and marketing to us.

[molson209]

what happens when China becomes mad at the USA , where do you get all your cars, computers , trains etc etc

Without the US consumer market, the Chinese economy is in big trouble, likely leading to massive social unrest and a bad outcome for those in power. So they can be “mad” but doubt they will stop producing and marketing to us.

ok how much more will these things cost ? What about those stupid light bulbs ?

[jazusamo]

And now China will gain more tech secrets....

You can bet the Chinese will get every last detail of the Chevy Volt engineering and that's mentioned in the other article I linked by Mark Modica.

[jazusamo]

Obummer or the Chinamen, they are all the same to these companies.

Dead on the money. Some large corporations are relying far too heavily on subsidies now.

[nascarnation]

China won’t have much pricing power. A lot of international competitors are undercutting them on wages and will grab business.

http://www.supplychainknowledge.asia/articles/20110406_4

[allmost]

"Professional subsidy-sucking General Motors..."

Well said. They could at least reinvest the billions that they have scammed in the country that deemed them too big to fail.

[lephantom]

GM was taken over by the American communist government.

Is it a surprise that the true nature of communist government to communist government is seen, letting the foreign communist government take totally over now?

[AfricanChristian]

Say whatever you wish about the Chinese, they are not dumb.

The real prize here is advanced jet engine technology from GE. They will allow GE to make huge investments in China so that when the Chinese finally ask that one favour, it cannot be refused.

China is the last great hope for GM, if China goes, GM goes. Money made from China is used to subsidise the unprofitable US operations of GM.

With every passing day, the Chinese are locking US businesses in a tighter embrace. They know that US businesses employ lobbyists and that lobbyists write trade legislation. I can hear calls for the US to sell advanced technology to the Chinese to “reduce the trade deficit”.

Things were a bit easier during the Cold War and Arabs are not that smart. The Chinese are a whole lot smarter than we think.

[AfricanChristian]

Say whatever you wish about the Chinese, they are not dumb.

The real prize here is advanced jet engine technology from GE. They will allow GE to make huge investments in China so that when the Chinese finally ask that one favour, it cannot be refused.

China is the last great hope for GM, if China goes, GM goes. Money made from China is used to subsidise the unprofitable US operations of GM.

With every passing day, the Chinese are locking US businesses in a tighter embrace. They know that US businesses employ lobbyists and that lobbyists write trade legislation. I can hear calls for the US to sell advanced technology to the Chinese to “reduce the trade deficit”.

Things were a bit easier during the Cold War and Arabs are not that smart. The Chinese are a whole lot smarter than we think.

[jazusamo]

Sadly I believe what you say is true and it’s yet another reason the turkey in the WH has to be sent packing along with his appointed thugs throughout the federal government.

[KeyLargo]

China Venture Is Good for GE but Is It Good for U.S.?

Can’t find full online version.

http://online.wsj.com/article/SB10001424052970204226204576601211373125234.html

[jazusamo]

No doubt it could be a disaster for the U.S. GE has untold info the Chinese would love to get their hands on.