SEOUL -- General Motors said Wednesday that it plans to invest as much as $416 million (500 billion won) this year in its South Korean unit, GM Daewoo Automotive and Technology Co., to beef up design and production.
But analysts were unimpressed with the world's largest automaker's plan for the fast-growing market, saying it would be enough only to cover the development of one model.
"It usually takes about 300 to 400 billion won to develop a new model," said Lee Young-min, an auto analyst at Meritz Securities. "It's not an aggressive investment plan, but without this investment, GM Daewoo would become less competitive."
GM Daewoo, which was launched in October after GM acquired a majority stake for $251 million, has said it may launch a large car and an SUV to better compete with market leader Hyundai Motor Co.
"A lot of it (the 400 to 500 billion won investment) is going to go to the Pupyong, Kunsan and Changwon plants," Nick Reilly, the head of GM Daewoo, told Reuters on the sidelines of a press conference. All those plants are in South Korea, including the largest and oldest plant in Pupyong, west of the capital of Seoul.
"They've had very little money to work with until now," Reilly added.
Reilly said around 2 billion won would also go to improve the design facilities for GM Daewoo vehicles.
GM Daewoo manufactures the Magnus mid-sized sedan and the Lacetti small-to-mid-sized car among others, but it has yet to roll out a large sedan and a SUV, which offer higher profit margins.
With models such as the Santa Fe and Sorento SUVs, South Korea's largest automaker, Hyundai, and affiliate Kia Motors Corp. together hold more than a 70 percent share of the local market. Kia is also scheduled to unveil a large sedan this year.
Since its former parent Daewoo Group became insolvent in 1999, GM Daewoo, South Korea's third largest automaker and formerly Daewoo Motor Co, has seen its market share of the country's 1.6 million vehicle market fall to about 10 percent, half its share in 1996.
GM Daewoo said in November it expected to produce 400,000 automobiles this year, up a third on last year's estimate.
GM said this year that its fourth-quarter net earnings quadrupled due to strong U.S. sales of its highly profitable SUVs and pickups, driven by heavy consumer incentives.