Saturday, December 21, 2002
GM signs deal for fourth auto plant in China
REUTERS
SHANGHAI: General Motors signed an agreement on Friday to invest in a 900 million yuan ($109 million) auto plant in eastern China, the US auto giant's fourth in the world's fastest growing car market.
GM said in a statement it would own 25 per cent of Yantai Bodyshop, longtime Chinese partner Shanghai Automotive Industry (Group) Corp would own 25 per cent, and their 50-50 joint venture -- Shanghai GM -- would take the remainder.
Shanghai GM would move production of its hot-selling small car, the Sail, to Yantai Bodyshop, which has an annual capacity of 100,000 units and would be renamed later, GM said.
"Shanghai GM cannot maintain its industry leadership position in China if it does not continue to grow with the market. It must continue to expand its manufacturing capacity and product line-up by combining its resources with those of companies like YBC," said GM China's chairman and CEO, Philip Murtaugh.
"Down the road, we will look at new opportunities to produce vehicles from throughout the GM family here in Yantai," he said.
China's burgeoning auto market is luring some of the world's top automakers seeking a bright spot amid a global economic slowdown.
Annual car sales in China jumped 55 per cent this year to top the one-million mark for the first time, as steady economic growth of about eight per cent and the launch of cheaper models put more vehicles within the reach of Chinese families.
GM competitors Volkswagen AG , Toyota Motor, Nissan Motor and others have announced plans to expand aggressively, hoping to sell to China's 1.3 billion population.
The $1.5 billion Shanghai GM is China's third-largest car producer with an 8.6 per cent market share, behind two plants owned by Volkswagen. It was running at near full capacity and was expected to launch a new mid-tier car on December 26.
Analysts said GM's strategy was likely to be to let Yantai handle small car production, and keep Shanghai GM rolling out mid- to high-end sedans.
Shanghai GM now makes Buick sedans and wagons and reported sales doubling to more than 100,000 vehicles in the first 11 months of 2002. Of that, 50,449 were Sails, up 129 per cent.
GM also owned a plant that makes SUVs and trucks in the northeast and a mini-vehicles manufacturer in the south.
Yantai Bodyshop, based in the coastal city of Yantai, was set up by the Shandong provincial government in 2001 to assemble cars using technology, engines and components from South Korea's Daewoo Motors.
The project came to a standstill after Daewoo went bankrupt and was not part of GM's and Shanghai Automotive's joint buyout of Daewoo assets announced in October.
GM said the body of the Sail would initially be transported from Shanghai to Yantai for painting and final assembly. Full production would eventually be shifted to Yantai.
The first Sail rolled off Yantai's production line on Friday and regular production would begin in May 2003, GM said.
Yantai Bodyshop occupied an area of 520,000 sq m (5.6 million sq ft) and had 850 employees at start up. Shanghai GM has dispatched around 60 staff to the project, GM said.
All three shareholders would have representation on its 10-member board of directors, GM said.
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