Recruiting in China

SHANGHAI — General Motors Co. says its first-half sales of vehicles in China overtook the U.S. for the first time amid a fitful recovery in American demand.

The 1.21 million GM-brand vehicles sold in China in January to June — a near 50 percent gain over a year earlier — compared with 1.07 million sold in the U.S. market, according to figures released separately by GM's U.S. and international headquarters.

The shift reflects GM's growing reliance on stronger growth in emerging markets, especially China, to offset sluggish sales back home.

The recovery in U.S. auto sales this year has been fitful, with month-to-month sales falling as many times as they rose. Sales of GM's four core brands rose 36 percent in the first half of the year over a year earlier in the U.S., but were down 12 percent in June from the month before, at 195,000, the company said.

In China, where first half auto sales figures for the entire industry are not due until next week, demand has begun to moderate but remains strong. Passenger car sales rose 55 percent in January-May to 5.7 million vehicles, while total vehicle sales rose 53 percent to 7.6 million.

Last year, China sped past the U.S. to become the world's largest auto market, with 13.6 million vehicles sold, as consumers with rising incomes responded to government tax cuts and subsidies aimed at encouraging purchases of small, energy efficient vehicles.

By contrast, U.S. sales of cars and light trucks plunged 21 percent in 2009 to 10.4 million as a shaky economy kept buyers away from showrooms.

Last year, GM's global sales overtook the home market as U.S. demand languished. Sales in China by GM and its partners surged 67 percent over a year earlier to a record 1.8 million vehicles. But while GM's U.S. sales fell 30 percent from a year earlier, they still exceeded its China sales at 2.08 million units.

By HIROKO TABUCHI

TOKYO — The strike that has crippled production at Honda Motor’s factories in China has come as a wake-up call to Japan’s flagship exporters as they seek to remain competitive and push into China’s burgeoning market with the help of low-wage workers.
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The strike by Chinese workers to protest pay and working conditions has cost Honda, Japan’s second-largest carmaker after Toyota, thousands of units in lost production in the world’s biggest auto market. The walkout began on May 17 at a Honda transmission factory in Foshan, in the southeast, and has shut down all four of Honda’s factories on the mainland.

“Honda takes the situation very seriously,” said Yasuko Matsuura, a spokeswoman for Honda in Tokyo. The company “is working toward reaching a resolution as soon as possible.” On Tuesday, there were conflicting accounts by the company and Chinese employees about how soon workers might return to their jobs.

In Tokyo, the strike has driven home a salient point: as Chinese incomes and expectations rise in line with the country’s rapid growth, while Japan’s own economy falters, the two countries face a realignment that could permanently alter the way their economies interact.

To complicate the picture, Japanese companies see the Chinese as crucial consumers of their goods to make up for a shrinking and aging market at home. Some of the most profitable Japanese companies, like Fast Retailing, which runs the budget clothing line Uniqlo, have relied on production in China since the 1990s to keep prices low.

“Japan is starting to realize that the age of cheap wages in China is coming to an end, and companies that looked to China only for lower costs need to change course,” said Tomoo Marukawa, a specialist on the Chinese economy at Tokyo University.

Despite the consequences for production costs, a rise in wages and standards of living in China would be welcomed by many Japanese exporters. The same companies that produce in China have also moved to sell their wares there, moving factories to the mainland to reduce costs further and meet the needs of local customers.

In Uniqlo’s case, as incomes in China rose, it followed up with local stores in 2002; the company has opened 64 outlets in China and aims to open 1,000 stores there in the next decade.

And yet, for Honda, prices of its cars in China may have to drop considerably before the company can truly tap into the market.

The strike by 1,900 workers at Honda’s Foshan factory came as a particularly big shock to Honda, which had announced just days before that it would increase production in China to meet demand.

Honda’s chief executive, Takanobu Ito, had said the automaker would begin major expansions at two joint ventures in China, Guangqi Honda and Dongfeng Honda, increasing capacity by 30 percent to 830,000 cars and minivans by 2012.

In April alone, Honda made 58,814 cars in China, a 28.7 percent increase from the same month the previous year and a monthly record.

Five of six Japanese car manufacturers with factories in China broke production records in April.

“The wave of motorization in China will not abate for the foreseeable future,” Mr. Ito said last week. He said that Guangqi Honda would introduce a compact car intended especially for the Chinese market that would be produced there in 2011.

The rise in output in China has been driven by a strong economic recovery in that country, which is buoying auto sales more than in any other major market. The rebound has been good news for Japanese automakers, hard-pressed to cut costs as they seek to return to profit after a collapse in car sales because of the global economic crisis.

Auto sales in Japan have remained sluggish, and sales in the United States and Europe have not rebounded to precrisis levels.

In China, Japanese carmakers are also racing to catch up with rivals after arriving relatively late in the market. The first Honda rolled out of a plant in Guangzhou in 1999, while Toyota did not produce in China until 2002.

Though sales have grown rapidly since then, Japanese carmakers are still struggling against local rivals because of a dearth of small, low-cost models, which are driving market growth in China.

Honda’s least expensive model sold in China, the Fit compact car with a 1.3-liter engine, is priced at about 83,000 renminbi, or about $12,500. A Chery QQ 1.3-liter minicar from the Chinese carmaker Chery Auto sells for about half the price of the Fit.

Given that the average monthly income in China s is 2,050 renminbi, about $300, the price of a Chery QQ is around 19 months’ salary, while the Honda Fit requires more than 40 months. The Honda Accord 2.4-liter sedan, meanwhile, sells in China for about $35,000, far beyond the reach of most workers.

For Honda, the promise of access to a huge, growing market in China was as much a factor as cheaper labor in luring it to open factories there. A 25 percent import tariff on foreign cars is also a major incentive for foreign automakers to produce in China.

More quickly than any other major Japanese automaker, Honda has started exporting cars made in China to third countries. A small plant in Guangdong makes its Jazz model for export.

Besides complaining about their pay, Honda’s striking workers complain about a wage gap: the company’s Japanese employees in China are paid about 50 times what local Chinese workers receive.

Experts say that at the factory level, Japanese companies will need to start changing the way they work with employees — giving them fair pay, benefits and a chance for promotion in line with those accorded to employees from headquarters in Japan.

“Japanese manufacturers need to raise morale by making sure that local staff can also climb within the company,” said Tatsuo Matsumoto, Asia researcher at the Japan Center for International Finance.

EMS-giant Foxconn is said to hire for its PC manufacturing factory in the Chongqing Xiyong Microelectronic Industrial Park in China.

EMS Foxconn is reportedly set to hire a further 6'000 staff over the next half year for the facility, with plans to reach a total work force of about 10'000 next year, reports CENS.

The EMS-provider currently employs around 1'000 staff at the Chongqing facility, which manufactures PC for various customers. The company aims for an annual production output of 10 million notebook.

Chinese officials say the country's exports surged in December to edge out Germany as the world's biggest exporter.

The official Xinhua news agency reported Sunday that figures from the General Administration for Customs showed that exports jumped 17.7 percent in December from a year earlier.

Huang Guohua, a statistics official with the customs administration, said the December exports rebound was an important turning point for China's export sector.

Huang added that the jump was an indication that exporters have emerged from their downslide.

However, although China overtook Germany in exports, China's total foreign trade -- both exports and imports -- fell 13.9 percent in 2009.

SHANGHAI, Jan 6 (Reuters) - Toyota Motor Corp (7203.T) said on Wednesday it sold 21 percent more cars in China in 2009 compared with a year earlier, lagging rival General Motors' [GM.UL] 67 percent gain.

Toyota, which competes with Honda Motor (7267.T) and others, sold 709,000 cars in China in 2009, up from 585,000 units a year earlier, it said in a statement.

That compared with 1.83 million vehicles GM sold in China last year, which also includes 1.06 million mostly mini vans, pick-up trucks made at SAIC-GM-Wuling, its three-way venture with SAIC Motor Corp (600104.SS) and Liuzhou Wuling Automobile.

Volkswagen AG (VOWG.DE) has yet to release its annual sales in China, but Winfried Vahland, president and CEO for its China operations said in November he expected the automaker to sell about 1.4 million vehicles in mainland China and Hong Kong last year, up more than 35 percent from 2008. [ID:nHKG261968]

Analysts attributed Toyota's slower growth to its lack of small cars whose sales have soared this year thanks to government tax incentives.

"GM and Volkswagen are a major beneficiary of the policy incentives favouring small cars, while Toyota's portfolio in China is not as broad," said Zhang Xin, an analyst with Guotai Junan Securities.

Still, Toyota's full-year sales marked an acceleration from 13 percent annual growth in the first nine months of 2009 and 17 percent growth in 2008.

The company originally said in a statement that sales were up 121 percent in 2009, but a company official later clarified that the rise was actually 21 percent.

Masahiro Kato, president of Toyota's China operations, said in November that the Japanese automaker was expected to sell about 800,000 cars in China next year. [ID:nHKG295551]

Earlier last year, Toyota rolled out revamped version of Vios and Yaris compact cars -- both eligible for Beijing's tax incentives.

It also launched RAV4, a sport utility vehicle produced by its venture with FAW Group in April 2009, followed by Highlander SUV, made at its tie-up with Guangzhou Automobile, the next month.

It did not say how many new models it will roll out in China this year.

Auto sales in China, the world's largest market, surged last year, boosted by government incentives aimed at bolstering domestic demand. (Reporting by Fang Yan and Jason Subler; Editing by Jacqueline Wong)

HONG KONG (MarketWatch) -- China's largest automobile manufacturer by sales, SAIC Motor Corp., said Wednesday it expects to post 10 times as much net profit in 2009 as it did in the previous year on the back of a robust jump in sales.

The passenger car and commercial vehicle maker said it expected an increase of more than 900% in 2009 net profit after a 57% jump in vehicle sales to 2.72 million units during the year, according to a filing with the Shanghai Stock Exchange.

SAIC, which operates joint ventures with General Motors Co. and Volkswagen AG (VLKA.Y 21.70, +0.05, +0.23%) , said earnings per share was expected above 1 yuan in 2009, up from about 0.1 yuan in 2008. That compares with analysts' median estimate of 0.93 yuan a share, according to FactSet Research.

The company's strong sales growth in 2009 was aided by government incentives to new car buyers aimed at boosting domestic consumption in the face of the global economic downturn.

However, SAIC (CN:600104 25.24, -0.41, -1.60%) shares were down 2% by mid-morning in a choppy trading session in Shanghai Wednesday, giving up early gains in spite of the performance.