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China Slaps GM with $29 Million Fine Amid Growing Tensions

Dec. 23, 2016
General Motors is accused of setting minimum prices on some models in its SAIC General Motors joint venture.

China slapped a $29 million fine on General Motors Co. (IW 500/3) for antitrust violations, a sign of the growing tensions between the U.S. and the Asian nation

The largest U.S. automaker is accused of setting minimum prices on some models in its SAIC General Motors joint venture. The Shanghai Municipal Development & Reform Commission, which imposed the 201 million yuan fine, alleged in a statement that GM punished dealers who sold cars for less than the prices set by the Detroit-based automaker. This is the first time China has fined GM, the second-largest foreign carmaker in China by sales.

China-U.S. relations have become strained after President-elect  Donald Trump proposed tariffs on Chinese goods, questioned the One-China policy regarding Taiwan and accused the Asian nation of stealing an American naval drone in international waters in the South China Sea. A Communist Party newspaper in November said a “tit for tat” retaliation could follow proposals by Trump for tariffs on the world’s largest trading nation, which had $627 billion in U.S. trade in 2015.

“GM fully respects local laws and regulations wherever we operate,” Irene Shen, a company spokeswoman, said in a text message referring to the penalty. “We will provide full support to our joint venture in China to ensure that all responsive and appropriate actions are taken with respect to this matter.”

Shares of SAIC Motor Corp. fell 1.2% to 23.17 yuan in Shanghai, before the penalty was announced. They have declined 3.3% since Dec. 14 when Bloomberg News reported that GM’s joint venture in China was being investigated for possible antitrust violations. In trading in New York, GM shares fell 0.2% to $35.61 at 10:50 a.m.

Daimler Penalty

Last year, China fined Daimler AG’s Mercedes-Benz unit $56 million for monopolistic pricing practices. In 2014, the government penalized Volkswagen AG and Fiat Chrysler Automobiles NV for similar practices as well as a dozen parts makers. The auto component suppliers were fined $200 million collectively.

Since 2011, the National Development and Reform Commission, China’s main economic planner, has pressured carmakers to cut prices as part of an investigation into the auto industry. The NDRC said the probe was meant to ensure market order and protect consumers.

Chinese media have reported that penalties on American companies may be coming. The China Daily reported earlier this month that the government would soon penalize a U.S. automaker for price fixing, citing an interview with Zhang Handong, director of the NDRC’s price supervision bureau. The Global Times wrote in an editorial that orders for Boeing Co. planes could be replaced with models from Airbus Group SE, and that Apple Inc.’s iPhone sales may suffer a setback.

GM’s retail sales in China rose 8.5% this year through November to 3.44 million vehicles, trailing only Volkswagen among foreign automakers. Its German rival boosted deliveries 12% to 3.59 million units.

By Bloomberg News

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Licensed content from Bloomberg, copyright 2016.

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