Can China Save GM?

On the congested streets of Shanghai, where drivers pay no heed to painted lane stripes, Buicks jockey for position with Toyotas, Audis and Volkswagens, honking as they maneuver through traffic made worse by the city's frenetic development.

But away from China's traditional wealth centers, in cities like Kunming and Zhengzhou and in vast rural areas, the roads are populated by entirely different vehicles: bicycles, scooters and Western knockoff cars bearing the badges of obscure Chinese brands.

One vehicle is ubiquitous throughout the Chinese countryside: the Wuling Sunshine. Reminiscent of a 1960s-era VW "hippie bus"--but half the size--the Sunshine is the vehicle of choice for China's small business owners and farmers, who use it to haul everything from electronics to sugarcane.

Priced as low as $4,500 (about 7% above its Chinese competition) and topping out around $9,000, the no-frills Sunshine is by far China's bestselling vehicle, with 597,000 purchased last year. (Government subsidies to rural buyers helped.) The bestselling car in the U.S., the Ford F-series pickup, no longer comes close to that sales level. There are more than 2 million Sunshines on China's roads.

The lucky manufacturer of this bestselling vehicle in the world's largest and fastest-growing market? General Motors--the company that needed a government handout to survive in 2009. In the U.S. and Europe GM may or may not succeed in making cars that consumers want. In China it is producing exactly what customers need: cheap transportation.

GM builds these vans so efficiently with its two Chinese partners that it plans to expand Wuling's entry-level product line to include passenger cars and replicate its low-cost business model throughout the developing world, starting with India.

GM was already a sales leader in China with its Buick and Chevrolet brands. Now its Wuling venture is the cornerstone of a growth strategy. To support the push outside the U.S., GM has quadrupled its engineering and design staff in China over the last few years and is investing $250 million to build a research and development center on the Shanghai campus of its new international headquarters.

"We're generating a footprint to grow from," says Kevin E. Wale, who oversees the strategy as GM China's president.

Of course GM, which borrowed $50 billion from U.S. taxpayers, has a lot of work to do to repair its business in its home market. But the automaker's future won't be determined in Detroit or North America. That future, instead, will play out in China and the rest of Asia, where GM is reinventing itself as a lean and highly profitable automaker.

Sidebar:
Sunshine Will Help GM Grow