GM abroad

June 19, 2005

GENERAL MOTORS is doing well - overseas. Even as the world's largest automaker is in crisis again - shedding more U.S. market share, losing $1.3 billion in the first quarter of this year, seeing its debt downgraded to junk, and announcing 25,000 job cuts and another distress sale of vehicles - GM has been peddling Buicks in China and Chevys in Europe at a healthy clip. That suggests the route to revival back home.

In China, GM plans to sell more than a million cars a year by 2007 and to overtake entrenched Volkswagen as the top foreign brand. In the next year or so, more Buicks may be bought in China than in the United States. Chevrolet, too, is finding new life overseas - via rebadged cars made by Daewoo, the Korean firm that GM took over in 2002. Worldwide, Chevy sales the first four months of this year were up 8.2 percent.

None of this is consolation for workers of Baltimore's closed Broening Highway GM plant. But foreign profits - GM China made more than $400 million each of the last two years - help keep the company afloat to honor its pension promises to Baltimore workers. It also suggests that GM, at least overseas, can build cars that sell well.

Yes, GM's union contracts - paying workers until 2007 even if they don't work and offering 1.1 million workers, retirees and their families cheap health care - burden the firm. A revived GM would be smaller and less weighed down by health costs; the company and the United Auto Workers last week started wrangling over benefit cuts. That won't be enough, however, if its vehicles don't inspire Americans.

Chrysler and Nissan both came back from near death; a key part of their revivals was designs that won customers back. In the United States, GM has fallen behind the market. Its successes abroad are based on nimbly responding to markets with the right vehicles - a lesson that GM must apply back home.

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