General Motors' Chinese Investments: East Meets West on the South Side of Town

general motors chinese investments east meets west on the south side of town

GM’s investment in The People’s Republic of China presents two main dangers. First, it extends GM’s supply chain over an enormous distance. Second, it enmeshes The General in the economy of a non-democratic country. Frank Williams has already raised the alarm over the possibility of Chinese nationalization. We’ve also highlighted the chances of de facto nationalization; based on western automakers’ [mandatory] partners’ history of stealing Western designs and technology. In all this, we shouldn’t ignore the fact that GM’s money is propping up a communist dictatorship.

Make no mistake: GM’s Chinese operations depend on the country’s virtually endless supply of cheap labor, which depends entirely on government policy. In theory, all Chinese workers belong to the Communist party-controlled All China Federation of Trade Unions. Although there are locally-set minimum wages, international observers report factories ignore national guidelines– which are a fraction of US legal requirements. Strangely enough, the Chinese government shows little interest in policing wages, conditions or working hours.

China’s HuKou or “household registration” system is the real engine of the country’s “economic miracle.” When any one of China’s 350m poverty-stricken peasants migrates to an urban area for a factory job, they must pay deposits and “permit fees” to secure a job (normally obtained via loans from employers). If a migrant wants to return home, they forfeit the money, equal to many months’ wages, and must pay off any company related debts. Equally heinous, immigrant workers are not legal residents in their new urban locations; they’re denied education, housing, health care and social services. They are, in effect, indentured slaves.

According to Columbia University law professor Mark Barenberg, HuKou lowers China’s manufacturing wages by 47.4 percent to 85.6 percent. Barenberg says the policy reduces the price of Chinese exports by 11 to 44 percent. Not to put too fine a point on it, the success of GM’s Chinese exports— including tens of millions of dollars of car parts headed for The General’s US automotive factories each month— reflects the Chinese government’s deeply-entrenched repression of peasants’ personal freedom: apartheid by any other name.

GM’s defense: it ain’t me babe. The claim a GM Chinese automobile production factory is a clean, well-lighted place. GM’s workers enjoy a safe work environment, a regulated work week and higher than average wages (for whatever that’s worth). Even if we assume that the parts makers supplying GM’s Chinese assembly lines adhere to GM’s elevated [for China] wage and safety standards, all GM’s migrant factory workers are subject to the same despicable Hukou system.

And you simply can’t get around the fact that GM’s contribution to China’s economic success supports the continuation of a repressive regime– even if the damage to human rights is done somewhere “off stage.” Apologists argue that GM and other western automakers are part of China’s modernization; once capitalism gains a foothold, political freedom will follow. So… where is it? Why are so many analysts convinced that China’s workers are continuing their “race to the bottom” in international labor standards? And then there's the moral relativist's redout: if we don't do it, someone else will.

That statement puts us smack dab in the middle of a wider debate over corporate ethics. However laudable their behavior at the factory level, whatever the competitive climate, should multinational corporations do business in countries with repressive regimes? Hardball players amongst you will argue that GM’s primary responsibility is to its shareholders, not Chinese or even American workers. Perhaps so. But it is instructive to realize that GM has a bit of history in this regard, and it ain’t pretty.

In an article published in this month’s Jewish Journal, writer Edwin Black outlines GM’s involvement with Germany’s National Socialist Party. According to Black, “GM and Opel were eager, willing and indispensable cogs in the Third Reich's rearmament juggernaut.” Black chronicles a pre-war meeting between GM’s overseas chief James D. Mooney and the Fuhrer, where GM's enthusiasm for Hitler's economic, military and social agenda was abundantly clear. (Mooney later received The German Eagle with Cross.)

“The Wehrmacht, the German military, soon became Opel's No. 1 customer by far… Expanding its German workforce from 17,000 in 1934 to 27,000 in 1938 also made GM one of Germany's leading employers. Unquestionably, GM's Opel became an integral facet of Hitler's Reich.” Black also points out that Germany’s blitzkrieg depended on Opel’s "Blitz” truck and the tetraethyl gasoline formulation technology sold to the Nazis by a GM subsidiary.

Did Sloan know about Germany’s repression during this time? Black certainly makes a solid case for the assertion. Did Sloan care? “In a long April 1939 letter to an objecting stockholder, [Sloan wrote] that in the interests of making a profit, GM shouldn't risk alienating its German hosts by intruding in Nazi affairs. ‘In other words, to put the proposition rather bluntly,’ Sloan said in the letter, ‘such matters should not be considered the business of the management of General Motors.’” So what’s changed?

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  • Joe Chiaramonte Joe Chiaramonte on Dec 14, 2006

    wsn, you're still making a free market analogy, which doesn't completely apply. From Robert Samuelson in the latest Newsweek: "China's emergence is altering the world balance. In spirit, its economic policies are mercantilist. It subsidizes its exports with an artificially low exchange rate; it is seeking captive oil supplies. China's policies are for China, not a stable world order." (http://www.msnbc.msn.com/id/16190938/site/newsweek/) So, wsn, educate me: Relating specifically to joint ventures between US and Chinese auto manufacturers, are these partnerships structured to be protectionist and advantageous to Chinese interests, closely controlled by the Chinese government? - or - Is China truly a free market?

  • Redbud51 Redbud51 on Dec 20, 2006

    Robert, This editorial persuaded me to read Edwin Black's entire article and as you commented, "GM has a bit of history in this regard, and it ain’t pretty." Boy did you nail it. Why the hell did it take this long to bring this to the light of day?

  • Sgeffe From everything I’ve heard, this stuff was circling the drain before 2020, and the WuFlu was the fatal hit to the jugular!As has been noted, what will all of the purveyors of canapés, shrimp cocktail, and rent-a-bartenders ever do?And can someone please explain why the only place I can put a paragraph break in this commenting system is in the top comment, and not a reply? I think that’s why the comments on here are way down! (At least on an iPhone.)
  • Sckid213 Now would be a good time for a REAL NAME for a new Acura model. This would be like if Caddy named the Lyriq "Allante." Why bring back bad memories.
  • ToolGuy Have you seen Honda's latest business plan? Neither has Honda.
  • Jbawden My wife has a model 3 performance, its plenty fast, and while looks are subjective, I think it's nice looking. But, I stand solidly behind my comment that these are soulless appliances. Unprecedented performance cannot overcome what was lost when we remove ICE motivation. For the record I think BEV are great, I've owned one for almost 2 years, but let's stop drinking the unicorn kool-aid and pretending BEV are just as engaging as what they are replacing.
  • Dwford The first all new Dodge in 8-10 years and it's a quick rebadge of an Alfa Romeo. And the people at Stellantis are mad at US??? They aren't serious about restoring Dodge or Chrysler.
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