It's not official quite yet -- the company won't release its final, official 2011 sales numbers until later this month -- but it's looking like General Motors (NYSE: GM) has reclaimed the global sales crown, less than two years after emerging from its historic bankruptcy.
Adding up the year-end numbers from GM's divisions and affiliates around the world gives a total of about 9 million vehicles sold in 2011, enough to put the General ahead of the surprise second-place finisher Volkswagen (OTC: VLKAY.PK), and longtime rival Toyota (NYSE: TM).
It's a nice capstone to an up-and-down-year for the General, which, let us not forget, is still in the midst of a major overhaul of its global product line that won't be completed for several more years. But that sales crown comes with a caveat, and it's one that GM shareholders would be well advised to keep in mind.
The asterisk: China
GM posted an 8.3% year-over-year sales gain in China, its largest market by sales volume, enough to retain its first-place position in the Middle Kingdom's sales rankings. GM's China efforts are powered by two big joint ventures:
- Shanghai GM, a roughly equal partnership with Chinese automaker SAIC, builds and sells cars under the familiar Buick, Chevrolet, and Cadillac brands. It sold 1.2 million vehicles in 2011, enough to make it China's passenger-car leader, according to GM.
- SAIC-GM-Wuling, a three-way venture that builds inexpensive little commercial vans and trucks under the Wuling brand, and low-cost cars under the recently introduced Baojun brand. A small number of Wulings are exported and sold elsewhere under the Chevrolet Move nameplate. It sold just under 1.2 million vehicles in 2011.
Wuling is the reason for the asterisk on GM's global sales total. While the General is technically a minority partner in Shanghai GM, a concession to the realities of Chinese politics and business, the venture is functionally just another part of General Motors. Its technical centers are integrated with GM's global product-development operations, its cars wear familiar GM nameplates (and many are identical to cars sold by GM in other markets), and so on.
Wuling is a bit of a different thing. GM owns only about a third of the venture and receives only about a third of the (tiny, thanks in part to incentives) per-vehicle profits, and it produces vehicles that don't really resemble any others in GM's global product portfolio. But what GM does own is the contractual right to count all of the vehicles produced by the venture as its own for purposes of global sales totals and market-share claims.
You see what I'm getting at with the asterisk?
It's a bit tempting to call that cheating, but I think that's probably a little too harsh -- GM hasn't (yet) made a big deal out of its return to global sales leadership, and CEO Dan Akerson has signaled that it won't. But it's worth keeping in mind as we look at how GM is performing around the world.
GM: We're focused on profits, not volumes
I'm hesitant to bust GM's chops too much over those sales totals, because Akerson, to his immense credit, has made it clear that his primary focus is on improving margins, not market share. But GM's profitability right now isn't great, in part because its product line is still very much in transition. While the arrival of the new Fusion signals that rival Ford (NYSE: F) has largely completed its effort to streamline its global product portfolio -- to offer the same core group of cars and trucks all over the world, with a few regional variations and additions -- GM's efforts to follow suit are several years behind.
That's one reason GM, for all of its impressive sales totals, isn't as profitable as Ford on a per-vehicle-sold basis -- and why its operating margin (just under 5%) lags well behind rivals like VW, which sports a margin in the 7.5% range (and a more coherent global product portfolio).
GM's long-term plan is to consolidate its roughly 30 "core architectures" -- global vehicle platforms -- with a goal of building 90% of its vehicles on just 14 platforms by 2018. There will still be a few regional and low-volume exceptions -- think of products like the Corvette, which doesn't share its underpinnings with any other GM product -- but that will be a radical shift from today, when only about a third of GM's total global production is built on truly global platforms.
In all likelihood, it's only then that GM will have a chance of being seen as the real global auto leader, one that leads with profits as well as sales volumes.
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