Will GM Leave Detroit, Michigan, And The USA To Become A Foreign Company?

Implications: If General Motors plan to sell 75% of its cars and trucks outside of the US comes true it will no longer be either the largest American OEM domestic seller of cars and trucks, nor even an American company any longer, because in order to remain an American company it must repatriate accurately and truly its overseas profits to America and pay taxes on them.

Analysis: Joining Ford in its prediction of selling most of its global production outside of the USA in between 5 and 10 years General Motors also joins Ford in, essentially, moving to abandon its status as an American company.

Ford predicted and announced as its goal in early 2007 that only 30% of its manufacturing and sales will be in the US in another 10 years. GM now joins Ford but posits 25% as an upper limit to its sales in the US in 10 years; this difference is notable, because at the moment GM's direction is to have 100% of its components and assemblies, used in the US to make cars and trucks for the domestic market, manufactured in China as soon as possible.

The remaining bottleneck for both companies is the dearth of Chinese exterior grade automotive steel for exterior use. But Baosteel, China's and the world's largest maker of steel, has already begun to make this key product.

What would be the point of any company with only 1/4 of its sales in the USA remaining subject to American taxation and laws governing employee pensions and working conditions? None at all.

By repositioning themselves in parasitic tax havens such as The Isle of Man, Jersey, the Caymans, or Bermuda, or even in a real country, which has more than banks, resorts, and other entertainments both GM and Ford could limit their exposure to liability from failed health care schemes, underfunded pensions, remediation of contaminated land, and, ultimately after a strategic privatization, irate shareholders.

Are these ends not the goal of the trajectory upon which both GM and Ford are on?

There is one fly remaining in the ointment, however, and that is time and the American dollar.

The BRIC economies are growing so rapidly, and their nationalistic focus on raw materials has given them such economic power already that both GM and Ford may actually have to backtrack and sever their foreign operations into truly independent foreign owned companies fairly soon. This will leave the American operations of both companies to drown in rising costs and liabilities as they will no longer be able to afford to import the much higher priced Chinese components and restricted raw materials they will need to continue in operation here; it will also not be possible to raise domestic pricing enough to cover the new costs, because in doing so they will price themselves out of the market against Japanese, Korean, and European companies, which have done a much smarter job of preparing for this inevitable turn of economic events.

Even though an American company controlled by a single family, Ford, is doomed to failure; it may survive as a group of foreign companies with American operations, and it won't surprise me if that group of foreign companies has people named Ford as principal shareholders.

GM may also soon become a foreign company with American operations, but I think that this company will be owned by a combination of Sovereign Wealth Funds, Private (non American) Equity, and perhaps a Russian oligarch or two. This is in fact exactly the situation today of the American steel industry's most dynamic segments with the exception of, in the case of the world's largest private steel group, substituting an Indian oligarch for the Russian one.

If my analysis is on the right track and the American people see it then I believe that they will stop buying cars from GM and Ford as those companies ramp up the speed of their exit from America.

And, finally, when and if the China price agenda backfires on Ford and GM expect them to ask Congress for subsidies and help.

I wonder how long it would take Carlos Ghosn to integrate Ford, GM, or moribund Chrysler into his FrancoJapanese group? I think I may well  find out.