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Chinese carmakers also seek support

They urge new policy, not bailouts. Some defer export plans.

November 20, 2008|Don Lee | Lee is a Times staff writer.

SHANGHAI — America's Big Three aren't the only carmakers turning to government with hat in hand.

Hit by a dramatic slowdown in sales, Chinese auto executives are cutting production, shelving plans to export to the U.S. and, a la Detroit, looking to Beijing for a little help.

Unlike the heads of General Motors Corp., Ford Motor Co. and Chrysler, who were in Washington this week pleading for $25 billion in aid, Chinese automakers generally aren't in dire financial straits. Rather than begging for cash or loans, Chinese managers say, they're pushing for policy changes, such as lower consumption taxes and pump prices, that might help jump-start sales.

Government needs to "provide an environment to encourage people to buy cars," said Cui Yizhang, marketing director at JAC Motors, a commercial vehicle maker in Anhui province.

In the interim, Cui said, JAC is tightening its belt. Production employees' work has been cut to three to four days a week from six plus daily overtime earlier in the year. The company has slashed salaries of high-ranking executives 40% and those of middle managers 20%.

For most of the last several years, China's auto market was booming, with annual sales volume growth often exceeding 20%.

But with sagging stock and property markets -- not to mention a global economy turned upside-down -- consumers started to pull back on purchases in the spring.

Sales in August and September fell from year-ago levels, and despite a 3% rebound in October, analysts are forecasting no growth next year.

GM and Ford's sales in China have slipped more than average, according to J.D. Power & Associates.

A few Chinese carmakers such as Shenzhen-based BYD Auto, which recently got an infusion of $230 million from investor Warren Buffett, are continuing to show solid growth in China, as are some foreign brands including Toyota Motor Corp. and Nissan Motor Co.

But overall, the downshift in China's car market is affecting domestic sales as well as exports, forcing manufacturers to pull back on their once-ambitious plans for international expansion. The global financial crisis already has contributed to a sharp slowdown in Chinese vehicle shipments to countries such as Russia and Ukraine, its top two overseas markets.

At home, competition has intensified as domestic and foreign carmakers deal with bulging inventory and major production cuts.

"Because of the impact from the credit crunch, we will hold our U.S. export plans temporarily," said Yan Zhi, director of the international trade department at Hunan Changfeng Motors, where sales of its Liebao model tumbled 34% last month. In fact, after attending the Detroit Auto Show the last two years, Yan said his company would skip the one coming up in January.

Several others won't be there either, including Chery Automobile Co., considered one of the most promising Chinese automakers. Its sales this year through October have fallen 8%, according to J.D. Power. Chery, based in Anhui province, had once hoped to break into the U.S. market by 2008, but in an interview this year, a spokesman said the company was now looking at entering within five years.

"I don't think any of these carmakers are eager to export to the U.S.," said Jia Xinguang, an independent auto analyst in Beijing. "Right now, the competition in the domestic market is very heated, and they are all putting their energy into it."

Jia and other industry analysts don't think Beijing will come to the rescue, at least not at this stage. Government officials may see this as an opportunity for restructuring and consolidation in the fragmented industry, said Michael Dunne, the Shanghai-based managing director of J.D. Power in China. Besides, he asked, "which ones do you subsidize?"

Although the Chinese car market has softened, it's nothing like what's happening in the U.S., said Luo Lei, deputy secretary general of the China Automobile Dealers Assn. in Beijing. The U.S. market is mature and saturated, he said, whereas in many Chinese cities, the potential for expanding car sales remains robust. And as Bejing continues to try to stimulate growth by loosening credit, Chinese automakers should have an easier time getting loans, he said.

"Most of these companies are not short of money," Luo said.

--

don.lee@latimes.com

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