To keep lead over Toyota, GM adds foreign Chevy production

To keep lead over Toyota, GM adds foreign Chevy production
Comment E-mail Print Share
First Published: Fri, Mar 09 2007. 04 01 PM IST
Updated: Fri, Mar 09 2007. 04 01 PM IST
By Jeff Green, Bloomberg
SOUTHFIELD: General Motors Corp. is increasing production of Chevrolet cars in markets such as India and Russia as it tries to retain a lead over Toyota Motor Corp., which may pass it as the world’s largest automaker this year.
Chevrolet cars based on Korean designs helped the automaker pass 2 million units for the first time in Europe and 1 million in Latin America last year, GM vice chairman Bob Lutz said. Since 2001, Chevy sales have increased 158% outside North America, making it one of the fastest-growing brands in the world, he said.
Growth in Russia, India and China is part of GM chief executive officer Rick Wagoner’s plan to focus on boosting sales in 11 emerging-market countries. Since Wagoner took over GM in 2000, GM has risen to first from second in those countries, which also include Brazil, India, Indonesia, Mexico, Poland and Turkey.
“While Chevrolet might not be as recognized globally as Ford or Volkswagen, it is probably the strongest brand in GM’s portfolio,” said John Casesa, managing partner of Casesa Strategic Advisors LLC. “Right now GM has a first-mover advantage in emerging markets and I’m not so pessimistic that I think it’s inevitable that they lose to Toyota.”
GM shares have risen 52% in the past 12 months.
Emerging Markets
GM’s share in emerging markets rose 0.4% to 10.9% last year, according to John Middlebrook, head of global marketing. Volkswagen AG was second at 9.3%, he said, followed by Toyota at 7.7% and Hyundai Motor Co. and its Kia Motors Corp. subsidiary at a combined 5.2%.
Wagoner said that he isn’t ready to concede that Toyota will overtake GM this year.
“We’ve got to do a great job selling the cars and trucks we have and we can’t say what’s going to happen to somebody else,” he said. “We’ll have to see how it plays out, but as I said we have the capacity and we have the product to continue to be a formidable competitor.”
The company’s sales globally have risen 4% in the first two months of this year, including a 37% gain in central and eastern Europe, he said. GM, which in 2005 sold more vehicles outside the US than within for the first time, made 55% of sales outside its home market last year.
“We’ve seen, especially, the Ukraine and the Russian markets growing very strongly,” Jonathan Browning, GM European sales and marketing chief, said on 5 March. “We see that continuing on into 2007,” he added.
GM sales in Russia grew to 130,000 in 2006 from 66,000 in 2004 and will probably exceed 200,000 this year, he said.
Worldwide Sales
GM worldwide sales overall fell less than 1% to about 9.09 million units last year, from 9.17 million in 2005. Toyota’s 2006 sales grew 8% to 8.8 million and it expects to sell 9.34 million vehicles this year.
Wagoner said on 6 March at the Geneva International Motor Show that he expects GM’s global tally to increase this year as worldwide sales rise to 70 million cars and trucks.
Chevy sales outside of western Europe and north America may rise 16% this year, with the fastest growth in eastern Europe and Asia, according to a forecast by Lexington, Massachusetts-based Global Insight Inc.
Russia Plant
The Detroit-based automaker is building a plant to produce at least 25,000 Chevy Captiva sport-utility vehicles annually in St. Petersburg, Russia. In India, GM is spending $300 million (Rs1,329 crore) for a second factory to build about 140,000 minicars in the western state of Maharashtra, more than doubling its potential output.
A factory in San Luis Potosi, Mexico, was the third new plant GM announced last year in an emerging market. The automaker didn’t disclose what it will build there. GM has 79 operating auto assembly plants, with 30 in North America, 17 each in Europe and Asia and the rest in Latin America, Africa and the Middle East.
“It makes sense to push their value brand in emerging markets as a leverage against rising costs here in the US,” Argus Research Corp. analyst Kevin Tynan said. “It does help to offset costs in the US. You could start importing from abroad where costs are lower as you increase production in some emerging markets.”
Wagoner also said GM is in “extremely” preliminary talks about a stake in Malaysia’s unprofitable carmaker Proton Holding Bhd. GM last year only sold 991 vehicles in Malaysia, which is one of the 11 markets where it wants to gain sales.
Model Mix
GM is relying on a mixture of new models such as the Captiva designed under a unified global production program as well as continued output of older cars such as the Chevy Matiz in Europe and Asia and Chevy Classic in Brazil to keep up with the demand for new models in the emerging markets, Lutz said.
Most of the new Chevy models are derived from assets GM obtained from the bankruptcy of Daewoo Motor Co. in 2002. GM took a controlling stake in GM Daewoo Auto & Technology Co. in August 2005. GM Daewoo expects to sell 1.7 million to 1.8 million units globally this year, compared with 1.53 million in 2006. It boosted sales 32% last year, led by exports.
Small minivans and their derivatives such as those built with SAIC-GM-Wuling Automobile Co. in southwestern China may be added to the portfolio to gain entry-level buyers, said Lutz, who uses a Wuling pickup on his farm in Ann Arbor, Michigan.
European Sales
Chevy sales in central and eastern Europe last year for the first time outnumbered its sales in western Europe, and that ratio probably will continue to shift as Russia grows and markets such as Poland recover from recent declines, said Wayne Brannon, the division’s executive director in Europe.
The emerging-markets growth comes as GM cuts $9 billion from costs this year after convincing 34,300 US union workers to leave early as part of a plan to close 12 North American locations by the end of 2008.
GM lost $10.6 billion in 2005 and $3.03 billion in the first nine months of last year. The automaker has said it will report a profit when its releases its fourth-quarter earnings by 16 March.
“The challenge for GM is to make sure problems in North America don’t derail their global strategy,” Casesa said. “Using the Daewoo assets has turned out to be a brilliant strategy.”
Comment E-mail Print Share
First Published: Fri, Mar 09 2007. 04 01 PM IST
More Topics: Corporate News | Sector Spotlight |