GM in China

08/14/96

Beijing, -- General Motors Corp executives, says they are ready to invest $2 billion in China's potentially huge vehicle market. GM plans to carve a large niche in the world's fastest-growing economy, senior company executives told a news briefing in Beijing.

"If all the planned ventures that we are now negotiating are realized over the next few months, we will be making investments of over $2 billion, including equity and debt, in China over the next few years," said Louis Hughes, executive vice-president of GM"s internaional operations.

"We believe that the General Motors company, the largest corportation in the world...must invest in China," Hughes said.

Disputes over trade, human rights and Chinese sabre-rattling in the seas near Taiwan have chilled Sino-U.S. ties in recent months, prompting Chinese state media warnings that the tensions could hit U.S. business hard in China's booming economy.

GM and its global car-making competitors have long vied for Beijing's favor as they bid for roles in the state-directed development of China's automobile industry.

The company had already invested more that $200 million in vehicle parts production in China, said Rudolph Schlais Jr, president of GM's China operations.

"It's now going to ramp up pretty rapidly," Schlais said.

The $2 billion figure for investment included more than $1 billion earmarked for a joint venture with Shanghai Automotive Industry Corp to make mid-sized cars, he said.

GM, which beat U.S. rival Ford Motor Co to land the venture deal, expected to begin in the fourth quarter of 1998 as planned, he said, but gave no details. Beijing has yet to give formal approval.

The U.S. auto firm already has one China joint venture making pickup trucks and others that produce vehicle parts.

Overproduction and an official austerity campaign have hit China's passenger car market hard in recent months, but Hughes said he was confident the Chinese market was on track to become one of the most important in the world.

"There will always be starts and stops, or accelerations and slowdowns...but the growth of the Chinese economy means invariabley there will be growth in the number of vehicles sold, significant growth," he said.

Bill Maloney -- The Auto Channel