SHANGHAI - General Motors plans to restart production from a stalled vehicle factory in northeastern China in September, freeing up space to focus on the prosperous eastern coast.
GM, closing in on Volkswagen AG's lead in the booming Chinese vehicle arena, plans to shift output of its Buick GL8 executive wagons to that factory from Shanghai, opening up capacity to make more cars at its main plant.
The once-moribund $230 million northeastern plant -- formerly called Jinbei GM -- will have capacity to make 50,000 vehicles annually, GM said in a statement seen by Reuters late on Tuesday.
The plant, in the city Shenyang city in the northeastern province of Liaoning, sold just less than 3,300 units in 2003, hampered by a poor distribution network and reliance on a single product -- the Chevrolet Blazer SUV.
Production of the SUV has been discontinued, GM said.
The new plant, called Shanghai GM (Shenyang) Norsom Motors Co. Ltd., would be effectively run 50-50 by GM and its longstanding Chinese partner, Shanghai Automotive Industry Corp., the country's largest car maker.
"Transferring production of the Buick GL8 to Shanghai GM Norsom will free up capacity at Shanghai GM," Chris Gubbey, Executive Vice President of Shanghai GM -- the Detroit giant's main Chinese venture -- was quoted as saying in the statement.
"This will allow us to capture more market opportunities by introducing more new products in new market segments," he said.
The restructuring will enable the northeastern plant's products to be sold through Shanghai GM's nationwide sales network, and enhance the plant's skimpy product slate.
It is the kind of expansion GM must maintain as it battles to grab market share from domestic leader Volkswagen, analysts said.
JUMPING ON THE BANDWAGON
GM says it commands just less than 10 percent of the Chinese auto market -- including all vehicles from cars to trucks -- versus Volkswagen's 12 to 13 percent, though the German company maintains it has a third of the sedan segment.
Foreign automakers have unveiled plans to invest some $13 billion to triple capacity to about six million cars a year by the end of the decade, prompting fears of a margin-sapping glut just down the road.
GM and its local partners are spending $3 billion over the next three years to raise annual capacity to 1.3 million units in a country it expects to become its number two market in 2004.
If sales growth and margins continue at present rates, China could produce about a quarter of GM's $4 billion in profits forecast by analysts for this year.
Shanghai GM now runs two plants -- one in China's richest city and the other in the northeastern province of Shandong. Shanghai Auto is also a partner in GM's plant in Guangxi in the southwest of the country, along with another Chinese company.