Rumors have circulated that General Motors is considering building Buick SUVs in China which would be sold both there and in the USA. The timing of the leaked plans could not be worse as China markets continue to collapse, spreading contagion to world markets. The timing also coincides with GM’s negotiations with the UAW, raising the suspicion that GM is using the rumor to leverage their bargaining power with the UAW.
Why is GM focusing so much on the Chinese market at the worst of times? Regardless of the weakening Chinese economy, it would be challenging to convince American consumers to purchase SUVs built in China given the perception of lower quality and safety standards. China also has not been the best of US allies considering ongoing computer hacking allegations, aggressive military build-ups and unfair currency devaluation tactics.
The UAW should call GM’s bluff on its Chinese gambit. If GM management is foolish enough to continue making bad business decisions, its stock price will continue to fall as GM loses market share and its cash reserves are depleted. Eventually those at the helm, including CEO Mary Barra, will have their jobs put at risk.
Mary Barra gets cut a lot of slack as the first female CEO of a major auto maker. Political correctness will not be able to contain criticism from shareholders at some point if GM share price continue to plunge. Unfortunately for both GM shareholders and the American taxpayers who sunk billions of dollars into the GM bailout, the damage being done by poor management decisions may be irreparable when US auto sales takes a cyclical downturn. The diminishing taxpayer-supplied cash hoard at GM will only last for so long.
Mark Modica is an NLPC Associate Fellow.