Can China Save GM? The auto giant is ice cold in Detroit, red hot in Shanghai.(General Motors)

Byline: Michael Hastings (With Sarah Schafer in Beijing)

No question, General Motors looks like a dying company on its home turf. With its market share in decline and losses mounting, GM has been selling everything not bolted to a factory floor. In recent weeks it has sold part of its profitable financial wing in a deal worth $8.8 billion, a 20 percent stake in Suzuki for $2 billion and an interest in Fuji for $422 million. That was all a cash-raising run-up to the blockbuster announcement last week that the auto giant would offer a buyout to 113,000 U.S. workers, virtually its entire American work force. Buyouts were also extended to 13,000 workers at Delphi, the parts maker partially owned by GM. "They're selling the furniture to stay afloat," says Peter Morici, professor of economics at the University of Maryland. "They need the cash to pay for the buyout."

This may be the death knell for an American icon--or a sign that its future lies in Shanghai, not Detroit. In the last quarter of 2005, as profits and sales in the United States continued to plummet, GM was passing Volkswagen as the No. 1 car seller in China, with 11.2 percent of the market. At the same time, China surpassed Japan for the first time to become the world's second largest car market, behind only the United States. GM now sells more cars abroad than at home; China is its hottest overseas market, and the only one in which its big Japanese rivals, like Honda and Toyota, are playing catch-up. While the GM buyout signals a dramatic reduction in its U.S. work force, with plant closings on the way, the recent addition of a second plant in Shanghai brought GM China's payroll up to 13,000, with new plans to expand on the way. "GM's an entirely different company outside North America," says Burnham Securities auto analyst Dave Healy. "The two situations [at home versus China] are almost diametrically opposite."

GM's success is due in large part to an early start and aggressive push in China, with the company now offering more models than any other player, says GM China president Kevin Wale. It was the first American auto giant to enter China in 1997, partnering with Shanghai Automotive Industry Corporation. While ...