General Motors Co., fresh off agreeing to a new union contract
that is expected to drive up its U.S. labor costs, plans to become
the first major auto maker to sell Chinese-made cars in the
U.S.
The nation's No. 1 auto maker by sales early next year plans to
start selling the Buick Envision, a midsize sport-utility vehicle
made in Shandong province, according to people familiar with the
plan. The move would add a third SUV to Buick's U.S. lineup at a
time when such crossovers are among the best selling vehicles in
the market.
Initially, the company expects to import a modest number—between
30,000 and 40,000—a year. But it signals the beginning of a
strategic production shift for the Detroit auto giant and a bold
experiment that will be closely followed by other auto companies
that have said they would eventually consider such a move.
Long among the top foreign sellers in China by volume, GM has
confined production there to meeting China's recent explosive
demand. But as sales gains have moderated and Chinese tastes in
cars converge with Americans', the potential for more Chinese
imports from GM and others could blossom.
Global auto makers had been slow to ship Chinese vehicles to the
U.S. and Europe, fearing Western buyers would shun them over
quality concerns. Volvo Car Corp., a small auto maker owned by
China's Zhejiang Geely Holding Group Co., was the first to
challenge that assumption when it started shipping sedans from a
plant in China to the U.S. this spring.
The arrival of Chinese-made Buicks in the U.S. is likely to rile
the United Auto Workers union, which has struggled to gain approval
from its members for recent labor deals, in part over U.S.
production guarantees. Over the summer, as rumors spread that GM
was considering importing vehicles from China, UAW officials called
the prospect concerning.
However, the UAW and GM discussed the move during recent labor
talks and appear to have come to an understanding. Union officials
have been hit hard in recent months with news that production of
some smaller, less-profitable passenger cars now built in the U.S.
will move to Mexican factories over the course of the next
four-year labor contract.
In 2011, the UAW agreed to a wage contract that led to big
bonuses for workers and the addition of tens of thousands of
factory jobs. This year, union officials won much richer contracts
that are expected to undermine those investment decisions and lead
Detroit executives to look for lower-cost manufacturing
options.
GM officials briefed on the plan say importing the Buick
Envision would fill a gap in the brand's product line, and isn't a
cost-saving measure. Buick's U.S. presence has declined as the auto
maker's market share slid and Chevrolet took center stage as its
mass-market brand. Buick's U.S. volumes have recovered in recent
years on more attractive models and a near-record pace for
light-vehicle demand.
In the U.S., Buick's most popular offering is a small crossover
called the Encore that is built in South Korea. GM has used its
Korean plants to supply low-cost vehicles for more than a decade,
but lately has been rethinking that strategy due to rising Korean
labor costs.
The brand's second-best seller in the U.S. is the Enclave, a
larger crossover built in Michigan. By adding a third crossover
vehicle to the lineup, GM could accelerate Buick's attempt to take
on other premium auto brands, such as Honda Motor Co.'s Acura or
Ford Motor Co.'s Lincoln.
Salt Lake City Buick dealer Jerry Seiner said customers are much
less concerned about driving cars made in China or other countries
today than in the past. He believes a Chinese-made Buick would do
well in America as long as it meets the quality standards customers
expect.
"I don't think there's a negativity that there would have been
when people were talking about [making cars] in Mexico and Korea"
years ago, Mr. Seiner said.
Rich Walicki, vice president of Jim Winter Buick in Jackson,
Mich., said there is a clear need in Buick's lineup for a midsize
crossover for younger families with children. "It's a great gap to
fill and we'd love to have it," Mr. Walicki said.
Buick has been successful importing the smaller Encore and
customers would welcome a slightly larger vehicle with more power,
he said. A Buick minivan now sold in China also would boost GM's
product line since the company currently doesn't have an offering
in that segment, he added.
As Buick sales were fading in the U.S. several years ago, they
were fast rising in China, now the biggest new-car market in the
world. Buick today is one of GM's two top brands in China alongside
its commercial Wuling offerings, and represents nearly a third of
its sales volume there—far exceeding Chevrolet, Baojun or Cadillac
sales.
In the U.S., Buick represents about 7% of the auto maker's
volumes. There were more than 100,000 Buicks sold in China last
month compared with fewer than 19,000 in the U.S.
GM's top Chinese partner, SAIC Motor Corp., will play a
significant role in a $5 billion initiative aimed at developing a
more competitive car for emerging markets, including India. And
executives are looking to ramp up the popularity of Chevrolet,
Cadillac and Baojun.
Write to John D. Stoll at john.stoll@wsj.com and Gautham Nagesh
at gautham.nagesh@wsj.com
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(END) Dow Jones Newswires
November 12, 2015 12:55 ET (17:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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