SAO PAULO, Brazil - General Motors hopes to dominate Brazil's fast-growing market for entry-level cars with its Blue Macaw.
Blue Macaw is the code-name for a car to be based on a stripped-down version of the Opel Corsa. It will carry a price tag under $10,000 and be built in new plant in Grazatai, Rio Grande do Sol.
GM executives and suppliers said the vehicle will be aimed at Brazil's market for 'popular cars' - vehicles with 1.0-liter engines that qualify for substantial tax exemptions.
With hot-selling models like the Ford Ka, Fiat Uno and Volkswagen Gol, the popular car segment accounts for more than half of Brazilian vehicle sales.
GM will build the Blue Macaw in a $600 million plant. About 20 major suppliers will be grouped at the site and feed major parts systems to the assembly line.
The first model to be built will be a three-door hatchback. The plant will produce 150,000 cars a year. Output could be boosted to 225,000 if demand is strong.
The car appears suited for emerging markets in Asia and East Europe. But a senior GM executive said the Blue Macaw's main market will be South America. 'We will export the car throughout South America,' said Lou Hughes, GM's president of International Operations. 'Beyond that, we'll see how things develop.'
WORLD CAR BY ACCIDENT
If the Blue Macaw succeeds, it will cement the Corsa's reputation as GM's accidental world car. The Corsa was developed for Europe, but it has become a hit in South America. By year-end, GM will have the capacity to produce 1 million Corsas worldwide.
With a new plant in Rosario, Argentina, ready to launch production this year - and with the Blue Macaw due to be launched in 1999 - GM is betting on the Corsa to help it challenge Fiat and Volkswagen in Brazil. To do so, GM expects to spend $4.5 billion in the Mercosur (Brazil, Argentina, Paraguay, Uruguay) region through 1999.
But GM's rivals also are spending heavily. That is why J.D. Power and Associates predicts GM's 23 percent share of light-vehicle sales in Brazil will shrink slightly to 21 percent in 2002. Even at that sales level, GM would trail only VW, J.D. Power predicts.
The Blue Macaw project appears to benefit from good timing. Only a few years ago, Brazil's annual inflation rate topped 1,000 percent. Credit was almost unavailable. With car loans set for a 90-day maximum, only 5 percent of Brazil's car sales were financed. Now, with annual inflation at 9 percent and dropping, more than half of all new-car sales are financed, according to GM.
'A BIG OPPORTUNITY'
That is the key issue for Brazil's price-conscious middle class, and it could hold the key for growth. In Brazil, the ratio of people to cars is 9.5 to 1. If Brazil were to match Mexico's ratio of 7.5 to 1, the Brazilian vehicle fleet would have to grow by an additional 4.5 million units.
'This is the fastest-growing market in the world,' said Richard Nerod, GM's group executive in charge of Latin American operations. 'We view South America as a big opportunity.'
GM's rivals do too. Although the Big Four - GM, VW, Ford and Fiat - still dominate the market, other companies are crowding in. Chrysler, Toyota, Renault, Mercedes-Benz and Honda all plan new assembly plants in South America. With all that production planned, J.D. Power sees a possible glut in 2000. The consulting firm estimates South American production capacity of 3.9 million vehicles but only 2.8 million units sold in that region.
Still, GM appears bullish on its future. The automaker's Corsa plant near Sao Paulo runs 23 hours a day to keep up with demand, said Marcos Munhoz, GM's material's management director for Latin America. 'Everything that we can make we can sell.'