GM Seeks to Develop New Sedan to Counter Grandeur in Korea

By Staff Reporter

Seoul August 7, 2005; Na Jeong-ju writing for the Korea Times reported that General Motors is considering a plan to develop a low-end luxury sedan for sales in South Korea to challenge Hyundai Motor’s Grandeur sedan.

Nick Reily, president and CEO of the U.S. auto giant’s Korean subsidiary, disclosed the plan in an interview with the Yonhap News agency.

The proposed vehicle will stand between its popular Magnus mid-sized car and the Statesman sedan, whose Korean sales launched in May after GM Daewoo signed a contract to import the cars from GM Holden, a GM subsidiary in Australia.

Reily said GM, the world’s largest carmaker, is taking steps to turn its Korean venture into a key export base for compact vehicles, adding the company has been expanding the production line-up in Korea to suit the need.

As part of the plan, GM Daewoo, the third largest automaker in South Korea, will take over an automobile manufacturing plant in Pupyong, west of Seoul, which was formerly owned by Daewoo Motor, as early as this year, the CEO said.

``We will start the legal procedure for the acquisition immediately,’’ Reily was quoted by Yonhap as saying. ``We expect the takeover to complete in mid-October, timed with the third anniversary of the founding of GM Daewoo.’’

GM, a long-time business partner of Daewoo Motor, took over most of the assets of the then-second largest Korean automaker in 2002 after its parent Daewoo Group went bankrupt. GM agreed to buy two of the three Daewoo Motor manufacturing plants in South Korea, but refused to purchase one in Pupyong, citing low productivity.

GM Daewoo management is now negotiating with the union of the Pupyong plant for the takeover, according to GM Daewoo officials and union members.

GM has now a 51-percent stake at GM Daewoo. GM Daewoo officials said the firm is in talks with creditor banks of the Pupyong plant over the price of the acquisition.

The Pupyong plant, located on a 990,000 square-meter area, is now producing GM Daewoo’s Kalos and Magnus vehicles on contract with the company. If the deal is complete, some 4,000 workers at the plant will be accepted as new GM Daewoo members, the officials said.

``The company has set aside some 1.5 trillion won to restructure production line-ups in Korea,’’ Kim Seong-soo, a GM Daewoo public relations official said. ``The takeover of the Pupyong plant is a part of a GM plan to expand production in Korea and use the country as a key export base.’’

GM Daewoo imported the Statesman sedan from Australia for sales in Korea, but it is likely to take charge of the project to develop a new low-end sedan from the beginning to the end, Kim said.

GM Daewoo has five manufacturing facilities in Korea and an assembly plant in Vietnam. Its products are assembled at GM facilities in China, Thailand, India, Colombia and Venezuela.

In 2004, the company sold over 900,000 vehicles and exported cars to more than 150 countries worldwide under the nameplate of GM.

The firm expects its exports to surpass 1 million units, and its domestic sales to reach 100,000 units this year.