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What can China's auto industry learn from GM's bankruptcy?
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13:09, June 04, 2009

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There are many reasons for the decline of General Motors Corporation (GM), which led them down the path from being the world's top automaker for 77 consecutive years to filing for bankruptcy protection. The revelation brought to China's automobile industry can also give multiple lessons.

Firstly, it is about the relations between becoming big and becoming refined and strong.

Following numerous mergers and acquisitions, GM now has over 10 brands, including Buick, Cadillac, Chevrolet, GMC, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall, GM Daewoo and Holden. Its annual sales once reached 10 million units, making it the "giant" in the auto industry.

However, merely focusing on the size gives rise to some ailments commonly found in large companies, including low efficiency in resource coordination, rising costs and sluggish market response, as well as the difficulty in operating numerous brands.

Now, the trend of getting bigger has also caught on in China's auto industry. Nearly all the auto companies plan to develop a complete series of products. A lot of enterprises have implemented multi-brand strategies and some have announced high profile goals of producing and selling one million and even two million units a year. The impulse of corporate acquisitions and reorganization is also running high. GM's filing for bankruptcy undoubtedly sounds a warning to these companies' pipe dream of growing bigger.

Secondly, another major reason why the GM kingdom collapsed is its paramount worship for the profit-driven factor.

Against the major backdrop of long-term low oil prices in the US, the global auto industry has developed along a major trend of saving energy and reducing emissions by producing small engines and light-weight cars since the 1990s. However GM ignored the trend, still placing its long-term development focus on the super profitable high-emissions SUVs and pickups. It could only watch when Japanese automakers, such as Toyota and Honda, triumphantly seized the North American auto market, eventually forcing itself into an embarrassing dead-end.

China's auto companies should learn a lesson from GM. Not only should they have an extended long-term vision, they must establish a scientific outlook on development. They must turn their pursuit of "profit-driven" into "value-driven," and only judge their success by whether they can create value for their shareholders, customers, the industry chain and even the entire society.

By People's Daily Online

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