Shanghai Gm Case Write-Up

Statement of the issue

Shanghai General Motors (SGM) needs to determine whether or not it is in their best interest to double production capacity by 2007 as their original plan states, or if they should reconsider and find an alternative course of action. With the unexpected slowdown of auto sales in 2004, SGM needs to make a wise decision regarding their future in China. If they choose to implement the original plan and double production, will they really see as much growth as they are expecting? With such high growth at their beginning of their venture into China, why wouldn’t they aim for the stars? However, as the rate of auto sales decreases in China, SGM has the potential to lose a lot of money and needs to weigh their options thoroughly.

Statement of alternative course of actions

Partnering with the Shanghai Automotive Industry Corporation (SAIC) was, by far, SGM’s greatest move when they ventured into the Chinese market. The SAIC, being one of the big three automobile manufacturers in China, was a great partner for SGM to have because they had a solid footing in the Chinese auto market and they also gave SGM the potential for high sales and market share. Since SAIC was state-owned, they were supported and closely related to policy makers, this being a huge incentive for SGM because it was a far better way to ease into the market than trying to open a wholly-owned subsidiary in China. On the other hand, SGM was a great partner for SAIC because they brought in newer, more advanced technology. To gain this kind of technology would have taken a lot more time and capital for the SAIC, had SGM not brought it to them.

For GM, getting a footprint in China was a very big deal. They were one of many companies who bid for a partnership with the SAIC. While SGM had many reasons to feel that expansion was a wise choice, they also had had many mishaps while in China. For instance, at one point the import of foreign cars had become very common due to the lowering of...