Reuters quotes a source with "direct knowledge of the matter" (i.e. themselves) that claims Chinese SUV maker Changfeng Motor Co. took at a look at buying GM's Dead Brand Stunting and said "Hahahahaha. No." More journalistically, "Changfeng, partly owned by Mitsubishi Motors Corp decided not to proceed with the talks after a tour of Hummer's U.S. production facility, as it saw only limited potential for it to market the vehicle, the source said. 'The Hummer is way too expensive for the Chinese military and demand from civilian buyers is not big enough to justify a purchase, especially with oil prices running near an all-time high,' the source said." OK, if that doesn't sound like a made-up quote, nothing does. Despite the fact that Reuters should have filed this one under Wild Ass Rumor, it's certainly true that the HUMMER brand is a drug on the market, and it ain't Viagra. CNN reports that India's Mahindra and Mahindra is also taking a pass. After Russian "oligarch" Oleg Deripaska said "nyet."

In a recent interview with the Weekly Standard, Iowa Senator Charles Grassley weighed-in on the food-for-fuel debate. "If part of our problem is that the Chinese are going to eat meat and you've got to have corn and soybeans to feed the Chinese their meat, then why isn't it just as legitimate for the Chinese to go back and eat rice as it is for us to change our policy on corn to ethanol?" Despite the growing consensus (so to speak) that ethanol is not an environmentally-friendly fuel, drives up food prices and contributes to world starvation, Grassley isn't willing to surrender the $4.5b of federal ethanol subsidies and the farm lobby support that goes with it. The Weekly Standard condemns Grassley's position. "As this 'let them eat rice' soundbite made clear, the debate over the food versus fuel issue is about as undignified as a full out real food fight at a summer camp cafeteria."  

Bob Lutz better watch out; his boss is challenging him for the title of Most Delusional Person on Earth. After the Olympic Games' opening ceremonies, Rick Wagoner told Financial Times, "I would say, from an assembly perspective [the pain] is largely behind us." And even though GM has had to cut large chunks of their workforce, is losing market share on an almost daily basis and flushed $15.5b down the toilet last quarter, he feels they're in "a pretty good position." Since the interview was in China, the discussion turned to their Chinese operations. "This has been miracle story from our perspective. For me it's the replay of the US auto industry in the 50s, 60s, 70s, but the upside potential is dramatically greater." Correct me if I'm wrong, but aren't those the decades when GM began, advanced and perfected the brand dilution and model overlap that brought them to the point they are today? And when someone pointed out that analysts expect sales growth in China to slow drastically this year, he didn't care. "That's not something we are losing sleep over." Of course, with the golden parachute he has strapped to his back, he probably doesn't loose any sleep over very much of anything. His private little world must truly be a wonderful place to live in.

For the last five years or more, GM PR has attempted to put a rosy glow on the latest sad stats from North American by saying, "Yeah, but we're kicking some serious ass in China!" From the beginning, TTAC has warned that A) the People's Republic will eventually game the market to favor 100% domestic carmakers B) GM is making the same branding mistakes in China that it's made elsewhere C) GM's Chinese growth has not kept pace with its rivals and D) what goes up, must come down. The New York Times reports that China's booming automotive market, indeed its whole economy, is entering the doldrums. "Demand is beginning to weaken for big-ticket purchases. J. D. Power and Associates just cut its forecast for car sales in China this year to 5.95 million — still up from 5.42 million last year, but much less of an increase than the company’s previous forecast of 6.2 million." And there are some interesting side-effects. "China’s slowing growth is one reason that gasoline prices have fallen in the United States, for example. Similarly, world prices for metals like copper, tin, zinc and aluminum have tumbled in the last several weeks, as voracious Chinese factories have closed, or cut back their consumption."  

There is no question that China's leaders want the Olympics to showcase/enhance The People's Republic's international prestige and power, in that 1936 Berlin kinda way. There's also no question that Beijing's air quality sucks, Big Style. To rectify that politically intolerable situation, The Powers That Be have relocated the city's major polluter (Oy! Beijing Shougang Group! Take your steel plant and piss off!). They've also banned half the city's 3.3m vehicles. Nope. Not good enough. Mother nature is not cooperating, with high humidity, light winds and high temps. As xinhuanet.com reports, China's ready to do whatever it takes to let Olympic athletes gulp great quantities of healthy O2. "A more radical measure would be to allow only vehicles on which had the last number of the license plate matched the last number of the day of the month, effectively banning 90 percent of privately owned cars." Eurozone ministers must be green with envy! Unfortunately… "I cannot ensure whether the government will take these measures," Professor Zhu Tong, air quality adviser to the Beijing Olympics reports, sadly. "Even if the measures are strengthened, the enforcement will last only three or four days." Oh. That's alright then.

Remember how an Italian court recently banned Great Wall's GWPeri from sale in Europe for too closely resembling Fiat's Panda? Well, the Shijiazhuang Intermediate People's Court sees things more… sympathetically. Fiat had sued Great Wall in China as well as Europe. But the legal battle has been lost on the eastern front. Reuters reports that the Chinese court dismissed patent infringement claims against Great Wall, ordering Fiat to pay $1,290 in court fees. Fiat is "evaluating its options" (read: figuring out who to bribe), posing petulantly for the press. "We acknowledge the Chinese court decision notwithstanding we point out that it goes on the opposite avenue vis-a-vis a resolution taken on July 15 by a court in Europe on the same issue," say Fiat spokesfolks. Great Wall, on the other hand, is using this as one of those "no such thing as bad publicity" opportunities, letting everyone know that it will start selling a pickup in Italy later this year. What, you thought all that cheap labor didn't have its price?

Auto Motor und Sport reports on a cautionary study by Bain & Company on the Chinese automotive market. According to the report, automakers estimate that the Chinese market will demand 9.3m new cars in 2010. Nein! "Our study shows that automakers are overestimating the Chinese market and are calling for too much production," says analyst Jörg Gnamm. "We're talking about an overestimation of 1.5m vehicles. That's half of Germany's annual sales, and the production capacity of four to five car factories." In other words, they reckon the Chinese market will grow by "only" about 12 percent per year to 7.9m units. Did  Jörg mention increasing competition for those sales? Yes he did. Volume automakers like Toyota, VW and GM are the ones who will face the toughest pressures. The warning comes shortly after Renault-Nissan CEO Carlos Ghosn predicted that the Chinese market could cool off in the next few years. And it doesn't factor in any Chinese government move to favor home-grown automakers over mandatory joint-venture "foreign partners." On that score, it's only a matter of time…

Our previous blog post made the connection between China's increasing demand for imported oil, The People's Republic's subsidies for the black gold ($40b p.a.) and the policy's inflationary effect on U.S. gas prices. Common sense (and The New York Times) suggest that other "managed economies" are using the same pro-growth strategy, amplifying the inflationary effect on world oil prices. "The oil company BP, known for thorough statistical analysis of energy markets [excellent hat tip to Big Oil!], estimates that countries with subsidies accounted for 96 percent of the world’s increase in oil use last year — growth that has helped drive prices to record levels." Hey, what happened to "Let's all blame the evil speculators?" Anyway, you think the U.S. is "addicted to oil?" Malaysia spent 7.5 percent of its economic output on oil subsidies. Indonesia shelled-out $20b this year to keep prices down. And where there's no political will to let the free market do its thing, there's no way they'll stop. "You talk about subsidies, you’re not only talking about the economy," asserts Purnomo Yusgiantoro, Indonesia’s minister of energy and mineral resources. "You’re talking about politics.” I.e. his job. So they're damned if they do, damned if they don't. And for this you pay at the pump. [thanks to OldDavid for the link]

Those who claim that the current price of oil is a supply – demand deal have some new ammo. Industrialinfo.com reports that The People's Republic of China imported 90.53 million tons of crude oil in the first half of 2008, up 11 percent over the same period last year. And you know all those dollars we send over to China to build the cheap stuff we buy at Wal-Mart? A big chunk of that went to "Angora, Saudi Arabia and Iran" [sic]. "The value of imported oil rose to $64.98 billion, representing a dramatic 85.8% increase in costs." Although China exports some oil (2.37m barrels worth $1.42b), experts reckon the percentage of imported oil will continue to rise. The only possible brake on Chinese oil consumption: the lowering of government subsidies. The New York Times pegs that number at $40b per annum. So far, nothing much happening on that front. All of which means the current status is likely to remain quo. 

Malcolm Bricklin is deeply regretting his plan to import Chinese Chery cars to the U.S. Automotive News (sub) reports that the man who brought Subaru to America is suing his erstwhile Chinese colleagues for corrupt practices. This after losing $26m (of someone's money) trying to bring Cherys to the US. The suit alleges Chery has "systematically broken contractual obligations, stolen plans for vehicles, made cars designed by Western companies without paying for their rights, and made deals without the slightest intention of carrying them out." In other words, business as usual. Bricklin once described his partnership with Chery in glowing terms: "I have never met a more cooperative, more intelligent, more aggressive group to do business with. We're working together as if we've been working together for 100 years." And now… "We're going to get them for everything they've done." Bricklin reckons Chery is legally vulnerable in the states; an American designer has successfully sued his overseas imitators. No matter how this shakes out, it's good news Chrysler's plan to import Cherys into the US.

Automotive News [sub] reports a Turin [Italy] court has banned the Great Wall GWPeri from European sales. The court agrees with Fiat's assessment that the car "is a (Fiat) Panda with a different front end." The court ordered Great Wall to pay Fiat about $24k for the first imported model, and nearly $80k for each future import. Great Wall's lawyers say they'll appeal the decision. Fiat is also suing Great Wall in China, where the Panda isn't even sold. That case is still pending. It's been rumored that Great Wall has been interested in the U.S. market for some time, so let me be the first to say, bring the GWPeri here! The Panda's supposed to be a fun little car, and our own struggling automakers could use a captive import or two right now. Bring it as a Chevy, and let Fiat angrily nurse its $2b of GM's money. Either way, this is clearly a sign of things to come. Up next, lawsuits over this (Great Wall) Scion xB, this (SG) RX300, this (Lifan) MINI Cooper, this HUMMER, etc, etc. Hell, Great Wall even stole its GWPeri ad from an old Citroen C4 spot. Talk about incorrigible.

Automotive News China [sub] managing editor Yang Jian has a column warning Chinese firms not attempt to buy Volvo anytime soon. Yang considers the Shanghai Automotive Industry Works (SAIC) and First Auto Works (FAW) as the most likely suitors for Ford's Swedish division. They alone have access to the state-controlled bank financing needed to make the deal happen. Never mind that, Yang says, there are a wealth of lessons that China is still not ready to buy-up western car brands. The first-ever Chinese purchase of a western brand, Nanjing Auto Group's takeover of MG, led to an overleveraged NAG being bought up by SAIC. When SAIC bought Korean firm Ssangyong, it had to endure labor walkouts over plans to shift production from Korea to China, followed by a slide into unprofitability. As a friend of Yang's at SAIC puts it "SAIC certainly won't consider buying (Volvo) since we know how much hassle an overseas acquisition could create." So it turns out that a booming market isn't enough for Chinese firms to overcome their unfree-market disadvantages. 

I'm not talking about Hugo Chavez-style ownership. My question was inspired by the rumor that China's Chery might be buying Volvo. Is this a big deal? Despite Ford's worst efforts, Volvo didn't lose too much of its Volvoness when Ford CEO Jac the Knife won the Swedish automaker in a game of bondtolva. Volvos are still [presumably] safe, boxy and not intended for hoons. Of course, Ford almost bought Ferrari, which surely would have strangled the fabled Italian marque in Dearborn's corporate tentacles. And Saab lost its soul the moment GM breathed on it. But how about Rolls-Royce? I say the company is better than ever under Bimmer's tutelage. Audi's done a bang-up job with Bentley and Lamborghini, too. The world didn't stop turning when India's Tata Motors bought Land Rover and Jaguar. And the fact that a group of Saudi businessmen own Aston is no impediment to the brand, apparently. So what's the big deal about a Chinese automaker buying Volvo? Anything? Everything?

Forbes reports that China's Chery Automobile is looking into a purchase of Ford's struggling Volvo division. According to Chinese media reports, Chery is shopping for some $4.4b in financing to make the purchase, although observers are skeptical that the purchase could actually take place. Chery (which is owned by the city of Wuhan) can not simply buy Volvo outright, as it has not yet been able to raise funds on Chinese capital markets. Having failed to meet the Hong Kong stock index's capital structure requirements, and with the Shanghai stock exchange taking a beating, Chery must rely on outside financing to make a play for Volvo. And as Zhang Xin, an auto analyst with Guotai Jun'an Securities points out, Chery's entire asset value is less than the rumored price tag for Volvo. Furthermore, Ford has already set up a joint venture with Changan Motors to build the Volvo S40 in China, while Chery has entered an alliance with Chrysler. And Ford is letting the considerable barriers to the deal do all the talking, as the International Herald Tribune reports that Ford once again refuses to comment on the possible deal. Still, with a new suitor for Volvo being hinted at each of the last few weeks, Ford's insistence that it is "committed" to Volvo seems just a tad disingenuous.

With mature markets under-performing spectacularly, Toyota continues to invest in supplying China's endless thirst for cars. Shanghai Daily reports that ToMoCo is about to drop some $529m on increased production capacity in the Middle Kingdom. With volume leaders GM and VW in its sights, Toyota hopes to snag ten percent market share (1m vehicles). Sales are already headed for 700k this year. Toyota is scrambling to meet demand with a production capacity of only 640k units annually. And so its joint-venture plants are getting more money for more cars; Guangzhou Auto Group will double production to 400k units, while Sichuan FAW Toyota will hit 30k and Changchun FAW Toyota will build up to 10k Priora and Land Cruisers. Of course tooling-up takes time; ToMoCo won't be finished until 2010. By which time steel and fuel prices may have taken some of the zest from the Chinese market. Still, in its pursuit/maintenance of world domination, Toyota can't afford not to build more cars in China.