General Motors has been slapped with a $29 million fine for what the Chinese government is describing as monopolistic pricing – but which some observers believe has much to do with growing friction between China and the incoming Trump Administration.
According to government-linked China Central Television, General Motors joint venture with local maker SAIC, SGM, had been illegally setting a floor on prices for a number of Buick, Chevrolet and Cadillac models.
The investigation had been underway before the recent U.S. election, but a number of observers have suggested that the decision to levy a fine against the largest American automaker was meant to be seen as a warning shot at a time when the incoming administration is suggesting it may shift the country’s position on Chinese trade and political issues.
This may be an effort “to show some color, as they say in China,” Michael Dunne, a veteran Chinese automotive industry analyst, told TheDetroitBureau.com.
Relations between China and the U.S. – or more precisely, with the incoming president – have soured in recent weeks. A key issue is President-elect Trump’s questioning of the longstanding “One China Policy,” by contacting the president of Taiwan. The mainland considers that island a breakaway state. Complicating matters, Peter Navarro, a hardliner on Chinese trade, will now serve as a key trade advisor to the new president.
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Shares of General Motors stock have skidded in recent days, reflecting concerns about possible setbacks in U.S.-Chinese relations – as have shares in Ford Motor Co. GM is the second-largest automaker in China and now sells more vehicles there than in the U.S. Ford, meanwhile, was a relative latecomer to the market but has been gaining ground quickly as it tries to close the gap with rivals GM and Volkswagen, the largest automaker in China.
“GM fully respects local laws and regulations wherever we operate. We will provide full support to our joint venture in China to ensure that all responsive and appropriate actions are taken with respect to this matter,” GM said in a statement following word of the Chinese fine.
The $29 million penalty is the equivalent of 4% of the sales revenues for the affected models for the past year.
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Foreign automakers dominate the Chinese market — though local manufacturers have begun gaining momentum. Sales growth in China has slowed over the last several years, creating downward pricing pressure and, the government has alleged, carmakers have responded with steps meant to resist price-cutting. GM is actually just the latest company to be hit with fines. VW’s Audi brand, along with Daimler AG, Nissan and Toyota have also been targeted by the government.
The attest fine won’t have much of an impact on GM’s bottom line, the company last year posting $2.1 billion in operating profits in China.
But there are concerns that by going after GM at this point the Chinese government is sending a warning that it could get even tougher on American companies if relations with the U.S. continue to worsen.
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