South Africa to Become Hummer H3 Export Manufacturing Base

GM eyes South African export base for Hummer 3 PORT ELIZABETH, South Africa, March 28, 2006; Mboniso Sigonyela writing for Reuters reported that General Motors wants South Africa as its main export base for Hummer H3 vehicles, with the first vehicle expected to roll off the production line in the last quarter of 2006, it said on Tuesday.

The world's number one automaker last year awarded General Motors South Africa (GMSA), a wholly-owned subsidiary, a contract to assemble its third generation Hummer to export to markets in Europe, Africa and the Middle East.

The Hummer H3 is a smaller and more road-friendly version of the Humvee military vehicle used by the U.S. military, and GM said its production could generate about $3 billion in output from the South African operation through 2012.

"We would like to make South Africa our major export base for H3 ... (including) right-hand drive and diesel. We want to get away from producing everything everywhere. Each country must specialise," said Bob Lutz, vice chairman of global product development.

GM last year announced an investment of more than $100 million to upgrade the Port Elizabeth plant for Hummer production. When in full capacity, the Hummer division is expected to produce 10,000 units annually.

"We are on track for the first Hummer to roll off the production line during the last quarter of this year. Over two months Hummer production supply has already been committed in this market," said GMSA managing director Bob Socia.

Multinational auto companies such as DaimlerChrysler (DCXGn.DE: Quote, Profile, Research), Volkswagen (VOWG.DE: Quote, Profile, Research), BMW (BMWG.DE: Quote, Profile, Research) and Toyota Motor Corp, (7203.T: Quote, Profile, Research) have taken advantage of the government's Motor Industry Development Programme (MIDP), awarding export contracts to their South African units.

Under the scheme, companies involved in export programmes can import vehicles and components at lower tariffs. Components for medium and heavy vehicles, excluding tyres, are duty free.

BIGGEST EXPORTERS

The MIDP has spurred the auto sector's growth, making it one of South Africa's biggest exporters and employers. The Hummer is GM's first major export programme in South Africa.

GM bought the remaining 51 percent stake in then Delta Motor Corporation, marking the auto giant's full return to South Africa after disinvesting in 1986 in protest against the apartheid government's policies.

GMSA currently assembles Opel and Isuzu vehicles. Its market share grew by 1.4 percent last year to 13.6 percent, with sales up 40 percent compared to an industry average of 26 percent.

Manufacturers sold a record 565,018 new vehicles last year as the lowest interest rates in more than two decades and increased disposable income spurred strong domestic consumption.

Socia said South Africans were already lining up to purchase the new Hummers.

"We are experiencing unprecedented demand from the South African public. It's sold out half a year before production commences," he said.

Lutz said GM expected South Africa, China and India to contribute to the group's overall sales volumes.

"We are facing challenges now, especially in the North American markets, and are doing all we can to address those," he said.

GM announced in Detroit on Tuesday that it would cut a few hundred salaried jobs in its initial effort to reduce its U.S. white-collar work force by 7 percent this year. The cuts are part of restructuring aimed at stemming losses.

GM lost $10.6 billion in 2005 as it faced high labour and commodities costs, loss of U.S. market share to foreign rivals and sluggish sales of sport-utility vehicles -- typically its largest profit generators.