GM leads for China plant
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May 20, 1997: 6:30 a.m. ET
GM reaches deal placing it in good position to win bid for plant in China
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NEW YORK (CNNfn) -- General Motors Corp. reportedly reached an agreement with the government of China that places it in a leading position to win another automaking project in that country.
Louis R. Hughes, president of GM's international operations, said that his company signed a memorandum of understanding on a joint venture, the Wall Street Journal reported Tuesday.
General Motors is seeking to be part of a deal involving a factory in Guangzhou. French firm PSA Peugeot Citroen holds a 22 percent stake in it but is in the process of trying to divest itself of it. The municipal government holds the majority stake.
Other automakers are interested in the stake as well, including Bayerische Motoren Werke AG, Daimler-Benz AG's Mercedes-Baenz subsidiary, Japan's Honda Motor Co. and South Korea's Hyundai Motor Co.
Were GM to win the project, it would likely involve an investment of several hundred million dollars. The venture would initially produce about 50,000 vehicles per year
GM's Hughes told the Journal that production could be increased to 100,000 annually. GM's Adam Opel AG unit would probably run the project. It is expected that it would produce smaller, fuel-efficient vehicles such as a variant of the Opel Corsa or Astra.
The Guangzhou plant presently manufactures about 30,000 cars annually but China feels those vehicles are somewhat outdated. Current stakeholder Peugeot says the Chinese have not shown enough initiative in sales and distribution and is looking to pull out of the plant and focus on its operations in Wuhan.
GM recently received approval for a $1 billion joint Buick project in Shanghai to make autos primarily for use by government officials and businessmen.
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