GM Announces $1.25 Billion Investment in Brazil

12/04/96

Reuters reports that General Motors announced plans to invest $1.25 billion to build three plants in Brazil. The announcement came shortly after a South American Business Journal report that said the carmaker would put Brazilian investment on hold and also on the heel of similar announcements by Volkswagen, Ford, and Fiat.

Mark Hogan, president of GM's Brazilian subsidiary General Motors do Brasil (GMB) said, "Brazil is on its way to becoming a power in vehicle production with all the conditions to become one of the world's top five producers."

GMB plans to construct a $600 million assembly plant to produce 100,000 vehicles from its Chevrolet line each year. The plant will be built in the Southern Brazilian state of Rio Grande do Sul. The company is also putting $500 million into raising a component plant in Brazil's southern Santa Catarina state, and $150 million into constructing a unit to build body parts in Sao Paulo state, in the southeast region of the country.

GMB indicated that the southern location of all of the plants would help it transport its vehicles to other countries in the Mercosur trading block, which is made up of Argentina, Brazil, Paraguay and Uruguay, and peripherally, Chile. The company also said that it had its eye on northern Brazil and other countries like Venezuela, and that further announcements may be announced soon.

The money GMB will put up for the announced projects covers %60 percent of the amount needed to finish them and will be complemented by money from local investors to make up the rest. GM's total investment in Brazil amounts to $3.5 billion.

Auto sales in Brazil have risen from approximately 1 million units in 1992 to an estimated 1.8 million this year. The growth is attributed to a climate of low inflation and the advent of consumer credit.

Paul Dever -- The Auto Channel