Phil Murtaugh is chairman of GM China Group, based in Beijing. He had been executive vice president of Shanghai General Motors, GM's $1.5 billion joint venture with Shanghai Automotive Industry Corp. that produces Buick sedans, a wagon and the new Sail compact.
He spoke with Automotive News Asia Editor James B. Treece last week in Shanghai. What follows are edited excerpts of their conversation.
How has the year been, for the industry and GM?
This has been a difficult year, quite honestly. The market has been impossible to judge. Competition has been fierce. We've got one of the smallest segments in the market, and probably have the most products, which three years ago no one ever envisioned. In 1999 the market was hot, with no competition. That's a lot easier market for anybody to play in.
Still, on the positive side, our volumes are 50 percent higher than they were a year ago. We've had significant growth. I think we've done an outstanding job of reading the market and responding to the market. In addition to the Buick wagon, which we call the GL8, we've introduced two new variants of the sedan: an up-level, driver-oriented vehicle and a smaller-displacement-engine base model.
So it has been an exciting year in terms of all the activity. The competition actually did a good job. They came to the market faster than we had anticipated with competitive products. The A6 is a modern vehicle. It's the current model European A6. The Honda Accord is the same generation as our Buick. Volkswagen came in with a new Passat. It has really been exciting seeing how fast the industry has adapted to consumer demand. This has truly become a market-driven segment of the economy. And it has been a lot of fun to be a part of that.
For the industry, are sales up or down?
The market has grown 17 percent (excluding commercial vehicles), which, if you look at in absolute terms, is pretty good. Most of us in the industry feel it has been a down year because sales have been really hampered. Customers basically are holding back because they think China's entry into the World Trade Organization is going to introduce a dramatic downward shift in pricing. There's a lot of speculation about new consumption policies that will make the cost of buying vehicles lower. There has been an awful lot of holdback among customers waiting for all these things.
When do consumers expect these issues to clarify?
That's part of the problem. Nobody knows. Consumption policy has been rumored for two years. WTO has been rumored for two years.
What do you worry about for next year, and what are you excited about for next year?
I'm excited by the Sail. I worry about the executive sedan. I'm not worried about the market being taken over by imports because I think we've got the best vehicle in the market and I think our pricing provides the highest value. What I'm worried about is how the market will develop. Are people going to go back to thinking, 'We're not going to buy because there's going to be another duty reduction next year'? Under WTO, every year, duties come down. What's that going to do to the market? The uncertainty is what I worry about.
Do you worry that WTO will bring more bankruptcies among state-owned enterprises?
I tend to deal more with the bigger players in China. They're going to be fine. What I worry about is that we're going to be asked to help out this company or that company that's bankrupt, but that has good political connections. Instead of letting these companies go bankrupt, letting the market forces do their job, I worry there's going to be a big push to save them all.