Chinese made Envision will plug gap in Buicks US SUV line-up

Chinese made Envision will plug gap in Buick's US SUV line-up

General Motors, soon after agreeing to a new union contract that is expected to drive up its US labour costs, reportedly plans to become the first major automaker to sell Chinese-made cars in the US.

According to the Wall Street Journal, citing sources "familar with the plan", GM early next year plans to start selling the Buick Envision, a midsize sport-utility vehicle made in Shandong province. The move would add a third SUV to Buick’s US lineup at a time when such crossovers are among the best selling vehicles in the market. GM initially imported the Buick Regal sedan built by Opel in Germany before moving production to the US.

Initially, the company expects to import a modest number of the Chinese SUVs  - between 30,000 and 40,000 a year, the WSJ said. The report said the move signals the beginning of a strategic production shift for the Detroit auto giant and a bold experiment that will be closely followed by other auto companies that have said they would eventually consider such a move.

Long among the top foreign sellers in China by volume, GM has so far confined production there largely to meeting China’s recent explosive demand. But as sales gains have moderated and Chinese tastes in cars converge with Americans’, the potential for more Chinese imports from GM and others could blossom.

The WSJ noted global automakers had been slow to ship Chinese vehicles to the US and Europe, fearing western buyers would shun them over quality concerns. Volvo was the first to challenge that assumption when it started shipping sedans from a plant in China to the US this spring. A small number of VW sedans have also been exported from China to markets such as Australia.

The Wall Street Journal said the arrival of Chinese-made Buicks in the US was likely to annoy the United Auto Workers union which has struggled to gain approval from its members for recent labour deals, in part over US production guarantees. Over the summer, as rumours spread GM was considering importing vehicles from China, UAW officials called the prospect concerning.

The WSJ said the UAW and GM discussed the move during recent labour talks and appeared to have come to an understanding. Union officials have been hit hard in recent months with news that production of some smaller, less-profitable passenger cars now built in the US will move to Mexican factories over the course of the next four-year labour contract.

In 2011, the UAW agreed to a wage contract that led to big bonuses for workers and the addition of tens of thousands of factory jobs. This year, union officials won much richer contracts that are expected to undermine those investment decisions and lead Detroit executives to look for lower cost manufacturing options, the report said.

GM officials briefed on the plan told the WSJ importing the Envision would fill a gap in the brand’s product line and isn’t a cost-saving measure. Buick’s US presence has declined as the automaker’s market share slid and Chevrolet took centre stage as its mass-market brand. Buick’s US volumes have recovered in recent years on more attractive models and a near-record pace for light-vehicle demand.

In the US, Buick’s most popular model is the Encore small crossover built in South Korea. GM has used its Korean plants to supply low cost vehicles for more than a decade but lately has been rethinking that strategy due to rising Korean labour costs.

The brand’s second-best seller in the US is the Enclave, a larger crossover built in Michigan. By adding a third crossover vehicle to the lineup, GM could accelerate Buick’s attempt to take on other premium auto brands, such as Honda's Acura or Ford's Lincoln, the WSJ said.

In the US, Buick accounts for about 7% of GM volumes. There were more than 100,000 Buicks sold in China last month compared with fewer than 19,000 in the US, the WSJ noted.