Can Gm Hit Racing Speed In Asia?

It's looking for more partners to boost its tiny market share

General Motors Corp. executives are popping up all over Asia. At the recent Tokyo Auto Show, President Richard Wagoner Jr. not only appeared at GM's exhibit but also shared a stage with Fujio Cho, president of Toyota Motor Corp., to talk about joint development of new technologies. GM officials are close to spending about $1 billion for a 20% stake in Fuji Heavy Industries, the maker of Subaru cars, and may do an engine-swapping deal with Honda Motor Co. In Shanghai on Dec. 4, GM China President Lawrence B. Zahner Jr. said the carmaker would be "strongly interested" in joining forces with Daewoo Motor Co. once the South Korean company's debt problems are sorted out.

LEAP FORWARD. The wheeling and dealing is all part of GM's drive to rechart its future in Asia before its U.S. and European rivals forge more Asian alliances themselves. Until recently, GM wanted to rule Asia's roads by selling more GM imports and ramping up green-field factories. Now, having boosted its stakes in Isuzu Motors Ltd. and minicar-maker Suzuki Motor Corp. earlier this year, GM is looking for more alliances with healthy companies--Daewoo excepted. Fuji Heavy Industries Ltd. is an ideal target--it has good technology, winning models such as the Legacy and Forester sports wagons, and needs capital to grow. GM's goal is to use the alliances to win 10% of the Asian market by 2004.

GM needs a great leap forward if it is to become a mainstream player in Asia. Including its sales in Australia, the company can claim 2% of the Asian market. And if it adds sales at 49%-owned Isuzu, the share jumps to 4%. But in crucial markets such as Korea, the second-largest passenger car market in Asia, GM sells only 20 Cadillacs a month. In India, it sells only 300 Opel Astras a month. In Japan, GM's best-selling model, the $12,621 Cavalier, is actually marketed by Toyota as part of a deal to settle a U.S.-Japanese trade ruckus several years ago. Even so, as of October, Toyota had only managed to move 5,150 Cavaliers out of its showrooms this year, barely half of its annual sales target.

Of course, GM is not spinning its wheels everywhere. Since GM bought out its partner, Probosutedjo, Suharto's stepbrother, sales are up 20% in Indonesia. And in China, a joint venture with Shanghai Automotive Industry Corp., in which GM has invested $1.5 billion, has received more than 20,000 orders for Buicks priced at $38,000 and up since their launch in May. That's 25% more than expected. "I'm sure we'll see very big growth next year," says an executive at DHS Auto Sales Co., a Buick dealer in Beijing. GM wants to extend the lineup next year and increase production to 50,000 vehicles from its initial target of 37,000.

But if it hopes to take market share from heavyweights like Toyota, GM needs more cost-competitive cars custom-tailored to Asia. It also has to build up extensive distribution networks and convince Asian customers that it can offer services competitive with its rivals. "They've got a lot of work ahead of them," says John Bonnell, a consultant at Automotive Resources Asia.

SHIFTING GEARS. Change is coming. In May, GM hopes to salvage its $750 million factory in Thailand by rolling out a micro-van called the Zafira, which will be sold locally and exported to Europe. GM will really shift gears with its launch in 2001 of a compact sport ute developed jointly with Suzuki. Called the YGM-1, it will pack a 1.3-liter engine to meet Asian preferences for affordable fuel-efficient cars. Similar gains are expected in compact pickup trucks through Isuzu. And Fuji Heavy would add strength in four-wheel drive and transmission technology.

GM has to be careful. Asian auto makers are migrating to GM partly because they have seen that the company is interested in autonomous partners rather than in taking full control, as Ford has done with Mazda Motor. But as its Asian constellation grows, GM may need to put a firmer hand on the wheel.

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