GM to use Daewoo venture to build China presence
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SEOUL, Oct 11, 2002, Samuel Len writing for Reuters reported that General Motors Corp intends to use Daewoo Motor Co as a springboard for its cars in China, one of the world's fastest-growing markets, by selling a stake in a Daewoo joint venture to a Chinese firm, analysts said.
China's third largest automaker, Shanghai Automotive Industry Corp Group (SAIC), has agreed to invest in a Daewoo spin-off led by GM, industry sources said this week.
Car sales are expected to rise 40 percent in China this year to hit one million vehicles for the first time and analysts said on Friday Daewoo's strength in subcompact passenger cars would complement GM's sales there.
"One of Daewoo Motor's strengths is subcompact car production," said Cho Soo-hong, an auto analyst at Dongbu Securities.
"GM's car in this segment, the small Metro model, has been dropped, so Daewoo's subcompacts should definitely help in China's rapidly-growing market."
GM, the world's largest automaker, agreed in April to pay $251 million for 42.1 percent of the Daewoo spin-off, GM Daewoo Auto & Technology, which would own three of the South Korean automaker's manufacturing plants.
Daewoo exports small cars to China whose low price has made them fairly popular with customers, analysts said.
Daewoo's plant at Kunsan in southwest Korea, capable of producing 220,000 subcompacts annually, is on GM's acquisition list.
WELL PLACED
GM sold more than 47,000 cars in China during the first half of this year, almost three times more than a year earlier, despite higher competition.
In contrast, Hyundai Motor has only recently moved into the Chinese market, forging a joint venture plant with Beijing Automotive Industry Holding Co this year.
"In order to be competitive in China's market, it takes more than just finished vehicles," said Yang Pyoung-seob, a researcher at the Korea International Trade Association. "It requires joint entry with parts making and financial operations."
Shanghai Automotive and GM already own a 50:50 joint venture plant in Shanghai that makes Buick sedans and compacts.
"GM's relationship with Shanghai Automotive and Daewoo Motor makes possible a dual production system in Asia," Yang said. "The two operations would offer a terrific synergy."
Unlisted Daewoo has seen exports fall and South Korean market share drop since the implosion of former parent Daewoo Group in 1999.
GM Daewoo Auto & Technology will have the capacity to build 800,000 automobiles worldwide, with three plants in South Korea and one in Vietnam.
GM Daewoo Auto & Technology said regaining lost market share in South Korea was its prime task, but said GM partners offered inroads into overseas markets.
"Different GM partners have their own capabilities -- technology, productivity and the possibility for joint entry into overseas markets," said Kim Chong-su, vice president of the spin-off, expected to be launched later this month.
Japanese minivehicle maker, Suzuki Motor Corp , would take 14.9 percent, Daewoo's creditors 33 percent and the remaining 10 percent would go to a GM partner -- expected to be Shanghai Automotive Industry. (With additional reporting by Tiffany Wu in Shanghai)
