GM to shift its international office to Singapore from Shanghai next year

General Motors Co's decision to move its international head office to Singapore from Shanghai will allow the US automaker to look to new markets in Asia, the Middle East and South America while remaining intently focused on its crucial China business, analysts said.

"China is the big prize in the region and in the world, and no one can ignore it. But that doesn't mean there is not opportunity elsewhere," JD Power and Associates analyst Tim Dunne told China Daily. "When you consider just India and Southeast Asia, you are talking about nearly 1.8 billion people - that is a lot of potential demand."

The move, announced on Wednesday, will leave the Shanghai office dedicated to China, which accounts for 30 percent of the Detroit automaker's sales and has overtaken the United States as the world's largest automotive market. The new headquarters will have about 120 employees to oversee GM's businesses in Africa, Southeast Asia, Australia, New Zealand, India, South Korea and the Middle East, as well as Chevrolet and Cadillac Europe, GM said in a statement.

The automaker said it will keep its Shanghai office open with about 250 employees for operations in China. In an e-mail to China Daily, GM said the move would allow the company to shore up its position as the largest foreign automaker in China.

"China is the world's largest vehicle market and it demands singular attention and focus for the company to remain a leader", GM's e-mail said.

GM's international operations division is the company's second-biggest generator of profit after North America. Last year, it had pretax profit of $2.19 billion on revenue of $27.69 billion. The North American unit had pretax earnings of $6.95 billion on revenue of $94.60 billion.

Stefan Jacoby, executive vice-president of GM's consolidated international operations (CIO), said having a Singapore team "a key step" in the CIO's transformation". The move, Jacoby said, "offers several advantages, including greater proximity to key CIO markets" such as the group of Southeast Asian nations collectively known as the Association of Southeast Asian Nations, or ASEAN, India, the Middle East and Africa.

The relocation, slated for the second quarter of next year, also will help GM "create a renewed identity for CIO and lead General Motors' umbrella strategy for the region", he said.

Michelle Krebs, Edmunds.com senior analyst, called GM's move "a blast to the past" - referring to GM's 2004 decision to move its Asia-Pacific regional headquarters from Singapore to Shanghai, then acknowledging China's increasing value to the US automaker.

Several years later, GM established a division for international operations in Shanghai, but reorganization announced in August split GM China from the international unit.

The new structure put greater focus on faster-growing emerging markets, as GM named Tim Lee, its four-year international operations head, as GM China chairman.

When GM moved its Asia Pacific operations to Shanghai, the move was "meant to show the significance of GM's China operations and more closely align the two", Krebs said. "It did not go over well with GM China, which had operated very successfully and autonomously."

The Singapore relocation will "allow more China autonomy" and "put more emphasis on other Asia Pacific operations like Thailand, where GM builds its global trucks, and up-and-coming Indonesia", the analyst said.

Dave Zoia, Ward's Auto.com editorial director, said moving international operations out of China "makes sense from an organizational standpoint", coming on the heels of the GM reorganization which took China management out of the international operations division.

The move also "signals the growing importance and growth opportunity represented by the rest of Asia region", Zoia said. It also is a sign that "the market has outgrown that management stream and needs to be treated as a stand-alone entity". In the end, he said, it "signals growth in market size and strategic importance for both China and the ASEAN region".

Dunne, market research firm JD Power's director of global automotive industry analysis, suggested multiple reasons for GM's move. For one, the lure of Singapore's lower operating costs may have proved too difficult to resist, Dunne said. Shanghai has become "an extremely expensive place to operate", he said.

Singapore's proximity to other major growth markets, plus its "highly educated labor pool", also could have influenced GM's decision to move its international headquarters, he said.

"When you are living and working in China, it's tough to think of anything going on outside of China because everything is happening so quickly and on such a large scale in China," Dunne said.

Li Fangfang in Beijing contributed to this story.

michaelbarris@chinadailyusa.com