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Bringing Detroit to China
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March 28, 1997: 7:29 p.m. ET
GM eclipses Ford and Chrysler with its Buick plant in Shanghai
From Correspondent Jody Davis
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NEW YORK (CNNfn) - As an emerging market that makes businessmen salivate, China is unmatched. Take cars, for example: In a nation of 1.2 billion people, only about one in 200 owns an automobile.
So it is no surprise that General Motors is making a major investment in the Middle Kingdom. Construction is starting soon on a $1.3 billion manufacturing complex in Shanghai. When that project is completed, GM will become the second largest foreign investor in China.
Buicks -- Centurys and Regals -- will begin rolling off the assembly line in two years, selling for between $18,000 and $24,000 each. At first glance, it would seem the average Chinese worker couldn't afford one, but analysts say that's not the case.
"Based on the billion people in China, and the likely hitting of middle class status for hundreds of millions of people over the next several years, GM wants to be there early, establish a brand equity early," said Nick Lobaccaro, an analyst with Bear Stearns. "And their ambitions are to be a major player in China for the long term."
To accomplish that, GM is teaming with China's No. 1 carmaker, Shanghai Automotive Industry.
During the first five years of operation, GM and other American businesses will export an estimated $1.5 billion worth of parts and equipment to keep it going. One of GM's financial advisors, Fred Vanderkloot of Peregrine Capital, says the company's courting of Chinese officials was brilliant. (160K WAV) or (160K AIFF)
GM now will eclipse both Chrysler, with its Jeep Cherokee plant in Beijing, and Ford, which had courted Shanghai Automotive for its own venture.
Ford, though, says it has every intention of staying in the game. Said a Ford spokesman: "they won round one."
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