Gm Finally Discovers AsiaPeter Engardio
At the Beijing Auto Show in July, Toy ota, Volkswagen, and Audi all staged major promotions. But none was more aggressive than that of an auto maker not known for its clout in Asia: General Motors Corp. At GM's exhibit, a bevy of smiling women in stars-and-stripes outfits ran up to visiting Chinese cadres, handed them balloons, and slapped U.S. flag stickers and the GM logo on their lapels. The Chinese must have been impressed: Orders for Cadillacs rose sharply this summer.
All over Asia, GM is trying harder. The Detroit giant has shifted its strategy there 180 degrees. Instead of viewing Asia mainly as a cheap-labor source of cars, GM now recognizes the region as one of the world's fastest-growing consumer markets. The company is on the move from China to Indonesia (table). Its goal, says Ronald J. Gilchrist, executive vice-president of GM's two-year-old Asia-Pacific office in Hong Kong, is to "gain footholds in each market and build on them."
VAST APPETITE. It will be a tough slog. For decades, Japanese carmakers have dominated the Asian markets in their backyard, setting up a network of local assembly plants. That's what GM aims to do, too, with a truck plant in China and plans to invest in Taiwan and Southeast Asia. Even with the cost disadvantage of cars shipped from North America, GM has found some loopholes to exploit. Taiwan and China, especially, are eager to import more from the U.S. and less from Japan to deflect political heat. And the developing countries of Asia have a vast appetite for small cars such as those from Opel, GM's German subsidiary.
GM's commitment to Asia comes right from the top. John F. Smith Jr., GM's president since April, developed international savvy during two years heading GM Europe and four in charge of all GM foreign operations. He has targeted Southeast Asia as a key market. Although car sales in the region have slowed from their 25% annual growth of 1986-90, analysts expect sales to rise by up to 9% each year during this decade.
GM sees Taiwan as a critical beachhead for its sales of U.S.-built cars. Not only have rising incomes set off a boom in car sales, but the government bars imports of fully assembled Japanese cars. Last year, most of the 14,000 cars GM sold there were large prestige cars. But in June, GM started selling Saturns in Taiwan through two dealerships. The cars are proving as hot there as they are in the U.S. In two months, the Taiwanese have snapped up 500 Saturns at $22,800 each. More are on the way.
With that kind of acceptance, GM is building a manufacturing base in Taiwan. Opel is investing $19 million in a joint venture that will assemble up to 20,000 Astras a year.
Within months, GM hopes to reach terms on a similar plant in Indonesia, a country with only 3 million vehicles for 182 million people. To crack the more mature markets of Malaysia and Thailand, GM wants to assemble a few thousand vehicles there, too. And in high-profile markets such as Hong Kong and Singapore, Opel is boosting marketing, playing up its German engineering.
But GM still has a lot to prove. For one thing, it has a history of failed Asian joint ventures. The biggest was Daewoo Motor Co. After much fanfare in the early 1980s about forging a global partnership, the South Korean venture collapsed this year over numerous management disputes. After 10 years of assembling trucks and buses in the Philippines, GM sold the venture to Isuzu Motors Ltd. in 1989. And while its Australian subsidiary, GM-Holden's Automotive Ltd., has 17% of that market, high production costs keep it from exporting aggressively into nearby Asia.
POPULAR PICKUPS. While GM is a leading car importer in Taiwan, its market share in the rest of Asia hardly registers. "I wouldn't say GM doesn't have a chance, but it's going to be very tough," says Tokyo-based auto analyst Ryuichiro Inoue of Mitsubishi Research Institute. "They're definitely late."
But in China, GM's prospects seem far brighter. With economic growth surging at 10%, joint ventures by Chrysler, Volkswagen, and Peugeot can't meet demand. Most imported cars are Japanese. But Chinese officials say they prefer working with Westerners in manufacturing joint ventures. GM's strategy is to bypass cars and focus on trucks, for which domestic demand is strong and foreign competition negligible. GM has a 30% stake in a $100 million joint venture launched in May in Shenyang to produce up to 60,000 pickup trucks by 1998.
The company is getting a boost from Beijing's current "buy America" campaign, aimed at cooling U.S. anger over its human rights record and $12.7 billion trade surplus. On July 28, Chinese companies spent $130 million to buy 7,000 cars from U.S. companies, including GM's Chevrolet Blazers, vans, and Luminas. China says it plans to place big orders for U.S.-made cars each year.
But for GM to make significant inroads in Asia, it will have to pump even bigger bucks into the region. With finances strained at home, that's asking a lot. Its stars-and-stripes team in China may have to try harder for years to come.
GM'S ASIAN MOVES -- Owns 30% stake in a $100 million plant in China that will produce up to 60,000 light trucks annually by 1998 -- Boosts distribution and marketing of Opels in Hong Kong and Singapore -- Exports 14,000 U.S.-made cars to Taiwan annually and plans to assemble 20,000 Opels a year there -- Expects to set up auto assembly operations in Indonesia, Malaysia, and Thailand DATA: BW