While GM's North American operation has been hemorrhaging money like a hemophiliac having heart surgery, its overseas operations have managed to turn enough profit to keep them from the bankruptcy court. Chinese sales are still growing, but the boom may go bust. In 2007, sales increased 19 percent. So far this year, sales are up 14 percent. Although China's still the world's fastest-growing auto market, raw material costs are soaring, and The People's Republic is easing off fuel price subsidies. Through their "joint venture" (i.e. shotgun wedding) with Shanghai Automotive Industry Corporation (SAIC), GM is the Republic's largest carmaker. But they're beginning to face stiff[er] competition from Toyota and Volkswagen. Joseph Lau, vice president for GM China, told Bloomberg "Shanghai GM has been facing difficulties by relying on existing models to compete with rivals that have added new ones." Sound familiar? Lau added that GM/SAIC has only one new model in the pipeline for this year: a locally-made hybrid version of the Buick LaCrosse. They're adding one new model next year, a Buick sedan to compete with the rapidly-growing Camry and Corolla. Does anyone know the Chinese translation for "Those who do not learn from history are doomed to repeat it"? 

Whatever else you can say about White House hopeful John McCain– and you're going to say lots– the guy's got a set. Followers of our E85 coverage will recall that McCain was the only candidate to come out against ethanol-related subsidies for corn farmers before the Iowa primary. While in Iowa. Yesterday, the Arizona senator toured Lordstown (home of "high mileage Chevrolet Cobalt and Pontiac G5 economy cars"), and then came out against a federal 911 for any of Detroit's ailing automakers. Speaking at a town hall meeting, McCain was all about putting government dollars into "research" into alt propulsion (a $300m prize for anyone who can guess how much money he'd send Motown's way). But a bailout? Automotive News [sub] provides the money shot: "A bailout, I don't think works." In fact, The Detroit News quotes McCain's antipathy to bailouts in general. "Frankly I just don't see a scenario where the federal government would come in and bail out any industry in America today." Over to you, Barack.

OK, OK, enough with the Yakov Smirnov references. China is no more communist than, say, California. And its vehicle sales prove it. With already-strong demand for passenger vehicles growing by 15 percent this year, Xinhua reports that Chinese automakers are set to sell 10m cars during 2008. According to information from the China Association of Automobile Manufacturers (CAAM), the demand is partly a product of falling car prices; a trend under threat from high steel costs. Moreover, as its car market matures, the Chinese government is poised to "move forward the industry restructuring by detailing standards on security, environment protection and energy saving," according to CAAM vice-chair Dong Yang. "We should keep a clear mind of the overall industry competence lagged behind that of the multi-national companies." Bringing domestically-produced Chinese cars up to international snuff will doubtless prove difficult. As the Chinese market matures and regulatory barriers to ownership increase, sales growth should level off. At some point, the People will bias the market towards home-grown products. Until then, it's double-digit growth as usual.

Does it sound like a good idea to advertise the new Lancia Delta in the U.K. by showing Richard Gere frolicking with some Buddhist monks from Tibet? Odd? Certainly. Cute? Maybe. Problematic? Well yes, if you dislike the kind of lefty vegetarian sanctimonious Hollywood type Gere represents (which I don't). But could this spot really be a reason to apologize? Just-Auto [sub] reports that upon hearing of cockamamie protests from Beijing, Fiat kowtowed to the dictators in the People's Republic. "Fiat Group reiterates its neutrality in connection with any political matter, be it on a national or international basis. To the extent that the Lancia Delta advertising may give rise to misinterpretations of its well established position of neutrality, Fiat Group extends its apologies to the Government of the People's Republic of China and to the Chinese people." Yes, it hurts the Chinese Government's feelings that the pro-Tibet Gere is shown in some vaguely positive way in Tibet, or something. And it dismays us that Fiat, a car maker on the ascent, apparently didn't know what it was doing when it OK'd this ad, and obviously doesn't have a pair.

When Kirk Kekorian's mouthpiece Jerry York said Ford should get rid of Volvo,few commentators thought the deal would go down this quickly. Even though a Ford spokesman insists "we have been consistently saying since the end of last year that Volvo is not for sale," Automotive News [sub] reports that Ford is negotiating with Shanghai Automotive Industry Corporation (SAIC) to sell their Swedish division. SAIC currently has joint ventures with GM and VW to build and sell cars in China. They also own the rights to Rover; they're branching out with their own vehicles based on Rover cars under the Roewe brand. Buying Volvo would give SAIC a strong inroad to the European and American markets and/or another brand to play with in China. If this deal falls through, an unnamed Russian investor is rumored to be interested in buying Volvo. A word of caution to the brand's suitors: Gott lära av andras fel, eftersom man inte hinner begå alla själv.

Paul Eisenstein of The Car Connection's Industry Insider blog thinks that China's going to cut the fuel subsidies that have insulated the Middle Kingdom from rising gas prices. Prices for gas have risen only nine percent since January 2007, compared to the nearly 80 percent jump suffered by American drivers in the same period. With the Chinese paying about $2.60 per gallon of unleaded (the exception to China's love affair with all things leaded), demand is still rising in China, with 1,300 new cars hitting the road every day in Beijing alone. So when will China make the much-needed subsidy cuts? Eisenstein joins the growing consensus that suggests the bitter medicine will be administered sometime after the Olympics, when China will be basking in global PR afterglow. With neighboring developing economies recently cutting fuel subsidies (Indonesia, Malaysia, Sri Lanka, Taiwan and India), the International Herald Tribune reports that the such cuts are necessary across the board to help keep global oil prices from spiraling out of control. With the International Energy Agency taking up the fight against subsidies, expect pressure to mount on China to end incentives for fuel consumption. Eventually. 

With the nastiest auto biz strike of the year (so far) almost, not quite behind it, American Axle is looking away from its eponymous home country for future business. Automotive News (sub) reports that the axle supplier has already established itself in developing markets like Brazil, China, Mexico and Poland, and is looking to expand in Thailand and India. Thailand is the second largest pickup market after the U.S., and American Axle is looking to take over axle supply there for locally produced Chevy Colorado pickups. While company officials declined comment, GM is AA's biggest customer, and as AN points out, "the company does not build foreign plants without the promise of future business." With the Thai pickup market set to increase seven percent this year, and American truck and SUV sales already down 28 percent on the year, this has "inevitability" written all over it. In India, AA's first plant is just coming online, and there's already talk of a second. AAM Sona Axle Private Ltd, the joint venture with Sona Koyo is building a new corporate headquarters in Pune, India and there's talk of building a greenfield plant to supply Tata Motors. With at least two U.S. plants set to shut down in the wake of the the AA-UAW agreement, the American Axle name is beginning to develop a bitterly ironic ring. Is a generic supplier name-change (Visteon, Delphi, etc) in the offing?

We've known for a quite some time that Chrysler's partnership with Chery is a long ways off from bearing, um, fruit for the U.S. market. Automotive News [sub] reports that Chrysler has sent engineers over to China to ready the A1 for American importation. Again. Still. "We need small cars," says Chrysler CEO Tom LaSorda, offering a piercing glimpse into the obvious while riffing on that old flick "Mars needs women." "Chery's cars are still not ready for that exposure into these markets." Nor will they be until that mythic 2010 debut date. LaSorda said China-built cars probably can't meet U.S. safety and emissions standards for "three years or more." Chrysler can't wait to pop its Chery in the North American market. The company announced it will be selling death traps Cherys in Mexico under a Chrysler nameplate while engineers ready the diminutive Chinese whips for the American market. The Bertone-styled Chery A1 will be imported to Mexico by year's end. While "lucky" Mexicans get to enjoy Chinese-market standards in reliability, build quality and emissions, Yanks will just have to wait before experiencing the joys of Chrysler-branded Chinese personal transportation. Or not. Meanwhile, what?

Here being China. We being GM. The speaker being GM CEO Rick Wagoner. And yet… Automotive News reports that The General is deploying Ye Olde "A Car for Every Purse and Purpose" strategy developed by Alfred P. Sloan– and then annihilated by every cash-grabbing, corner-cutting CEO since, sending the former world's largest automaker sliding towards bankruptcy. Never mind; it was implementation that killed the golden goose. "The China market also gives it a rare chance to try to repeat the business past with a happier ending for investors… GM introduced Chevy to China just three years ago after concluding its Buick brand was over-extended by a product line-up that had saddled it with everything from a minivan marketed as a kind of executive taxi to a cheaper hatchback. 'We could see Buick was being stretched,' [GM's head of Asian operations Nick] Reilly said." Uh, hello? Buick still sells the same product line-up in China as before. They've simply added Chevy (i.e. rebadged Daewoos). Oh, and Cadillac's in the People's Republic as well. What are the chances GM will show the same branding discipline in China that they've shown in the U.S.? And if it's good enough for China… 

Suzuki and Toyota are radically increasing production in China, in an attempt to compensate for faltgering sales in more established markets. Thomson Financial News (via Forbes) reports that Suzuki plans to double production "as early as next year" at its Chonqing-based ChangAn factory. The plant currently churns out 100k Chinese-market Altos. But a recent $144m investment in a new 1.5-liter engine for the ubiquitous (in China) hatchback, and a forthcoming additional $100m + investment in assembly lines, will see production rise to 200k annual units. Toyota is likewise betting long on China; a new factory is under works now in Jilin. Set to open production "some time next decade," the factory will lift ToMoCo's China production to over 1m per year. This will make China the number two manufacturing location for Toyota after the United States, where it builds some 1.5m vehicles annually. This will knock Hyundai out its position of top car manufacturer in China, after the Koreans recently spent nearly $800m to increase output to 600k per year.

"Automakers wage war for market share," reads the headline over at China Daily. The current battlefront of that war can be viewed at the 2008 Beijing International Automotive Exhibition, which runs through April 28th. With 890 vehicles on display in the 1.9m square foot arena, the nine-day event is expected to attract more than 600k visitors. The spoils of war can be lucrative, too, with Chinese vehicle sales up 21.4 percent year-over-year, which translates to 2.58m cars sold in the first quarter. Total sales are predicted to surpass the 8.79m units sold in '07 and reach 10m vehicles in 2008. While the suspected recession in the U.S. has tempered car sales here, the prospects in China offer a respite: Ford's Chinese sales have "rocketed" by 47 percent in the first quarter. GM's Rick Wagoner figures China will account for more than 40 percent of global auto sales growth in the coming decade. Meanwhile, Mercedes-Benz launched its C-Class sedans in China last month and Ulrich Walker, the chairman and CEO of Daimler Northeast Asia Ltd., is amazed at China's transformation. In a single generation, a population simply striving to own a "Flying Pigeon" bicycle now strives to own a "big Benz." "In the history of the world, no country has changed as much as China in the past 30 years," says MB's Walker.

The DOT wants to raise CAFE standards even higher. To meet the new standards, automakers will have to downsize and lighten everything they offer. However, their expertise (and profit) is in large trucks/SUVs. Whatever will they do? Well, there's always China. The Associated Press reports China's nouveau riche auto buyers think size does count. They're going for gas guzzlers like large SUVs and luxobarges; they're the fastest-growing market segments in the People's Republic. And the automakers know it. The star of the GM display at the Beijing Auto Show is the Escalade, which they'll introduce to the Chinese market next year. Mercedes says China is the second-largest market for the S-class (the U.S. is the largest), R-class sales are up 110 percent in the first quarter and the M-, G- and GL-class sales are up 100 percent. Remind me again why we're raising our mileage standards to cut fuel consumption here? Oh yeah. We're giving up our gas guzzlers so the most polluted country in the world will have plenty government-subsidized fuel for theirs. Got it.

Yet another major manufacturer is jumping into the entry-level segment defined by Tata Motors' Nano subcompact. Reuters reports that Mitsubishi is developing a low-cost car for the Chinese and Thai markets, based on its Kei-class city car platform. Mitsu Prez Osamu Masuko announced the project at the Beijing Auto Show. "The mini vehicle business in a sense is a weakness because they are only sold in Japan," Masuko said. "But we can turn this into a strength by building a global car using the platform." The Japanese government-mandated 660cc engine will be replaced by a one-liter unit for export, with the resulting ride priced at just shy of $10k. With North American sales plummeting, Mitsubishi is joining the industry trend of looking to developing markets for sales, both from entry-level models and as a partner to suppliers of engines for Chinese manufacturers. Mitsubishi's Chinese engine factory partners will be increasing capacity to some 900k units per year, up from 470k, as Chinese demand booms.

VW's Lavida Chinese-developed sedan looks about as exciting as a postage stamp (apologies to philatelist pistonheads). Worse, the car's interior lacks VW's trademark style and quality, what with the world's worst fake wood trim (excluding the press-on plastic wood from the '60's). Never mind. Based on the VW MkIV Jetta/Golf platform, the Lavida will be cheap as chips to build. The selling price is a rumored  150k – 190k RMB ($21k to $27k). Talk about product overlap: China's version of the current MkV Jetta sells for 120k – 180k RMB. So, dollar for dollar, yuan for yuan, Lavida or a Jetta? Meanwhile, if VW could bring a lightly-contented version of this car to the US for say $10k – $15k, even if it had only 120 horses, it'd be a huge hit for a company that's abandoned its cheap and cheerful brand reputation stateside. It could happen…

Pixamo gallery includes the press photos and live pictures from the Beijing Auto Show.

After the Chevy Volt makes its U.S. debut, GM plans to sell the  gas – electric hybrid worldwide. GM Car Czar Maximum Bob Lutz has already announced Australian Volt sales will begin "one or two years" after the car's U.S. launch. GM also has their corporate eye on the "very important" European market. But just as the rest of the U.S. will have to wait for California to get their Volts, the rest of the world will have to wait for China. Rick Wagoner says his employer's targeting The People's Republic as the Volt's second market– with one big "if." According to Reuters, GM is "lobbying China's government to provide subsidies for the development and sale" of alternative powerplants. Wagner wants China to provide tax credits and (while they're at it) develop a hydrogen refueling infrastructure for fuel cell vehicles. Of course, much of GM's credibility in such matters (and everything else) depends on a successful Volt launch in 2010, which Rabid Rick admitted is running "down to the wire." God forbid they should release a not-ready-for-prime-time vehicle just to make the deadline…