General Motors Co. will work with a Chinese auto maker on a $5
billion initiative to overhaul how it creates cars for developing
markets, a move that represents the U.S. auto maker's first major
development project in China to address global markets.
The Detroit auto maker plans to work with SAIC Motor Corp., one
of its Chinese joint-venture partners, to develop a common
blueprint, or architecture, that can be tailored for specific
styles or regional markets. Their goal is the same one rivals
Volkswagen AG, Renault SA, Ford Motor Co. and Toyota Motor Corp.
are spending billions of dollars to achieve.
SAIC, a state-owned company that is a major car maker in China,
is looking to become more viable on the global stage. Having
aligned with the biggest auto makers in the world, including
Volkswagen, SAIC's multi-billion-dollar joint venture with GM could
help the Shanghai-based company finally create a car capable of
appealing to a broader set of car buyers.
China's Geely Automobile Holdings Ltd. also is expanding a joint
venture with Volvo Car Corp. to design a subcompact car that meets
safety and quality standards in Western markets where Chinese
brands have struggled to gain a foothold.
At GM, the planned platform investment is equivalent to what the
auto maker is spending on its current stock buyback program, and to
the money it has earmarked for updating its U.S. manufacturing
operations through 2018.
The auto makers that first gets the emerging-markets concept
right could impact the industry pecking order for decades to come.
The industry currently sells about 85 million vehicles a year
around the world, the majority of which are in China, Western
Europe and the U.S.
The plan, scheduled to be disclosed on Tuesday by Chief
Executive Mary Barra, comes as GM is spending about $9 billion
annually on capital expenditures. It has earmarked $14 billion to
revive Cadillac and $16 billion to maintain leadership in
China.
GM President Dan Ammann said in an interview the Detroit auto
maker primarily will sink its $5 billion emerging-markets
investment into operations in China, India, Brazil and Mexico. Its
joint ventures in China—the world's largest market and where GM
holds 14% market share—will contribute additional investment beyond
the disclosed outlay, but Mr. Ammann didn't disclose the size of
that additional commitment.
GM's plan calls for the single new platform to replace a
cluttered network of vehicles it currently markets. Mr. Ammann
declined to say how many architectures will be consolidated, but he
noted vehicles like the Chevrolet Aveo will move to this program.
In India, for instance, GM is now using six different underlying
architectures—a model that the company admits is extremely
inefficient.
If the effort succeeds, the $5 billion global vehicle project
could be responsible for 2 million in annual vehicle sales, Mr.
Ammann said, or roughly 20% of its current volume. To ensure those
sales are profitable, GM has to confront the problem that small
cars equipped with the latest safety gear, fuel-saving components
and technology, deliver far lower margins than the large
sport-utility vehicles and pickups that GM sells in North
America.
GM and others expect developing markets in Southeast Asia and
South America to account for a hefty share of industry growth in
coming years. That means they must predict how a patchwork of
regulations and consumer tastes in markets around the world could
converge in the next decade.
But the exercise is necessary if GM is going to achieve a
decades long quest to simplify its sprawling business. Ford has
been consolidating its architectures since former chief executive
Alan Mulally took the helm in 2006. The Dearborn, Mich., auto maker
now works off nine global vehicle platforms, down from 27 in
2007.
GM, in contrast, has 25 different vehicle architectures that it
uses to build cars around the world, vastly more than its goal of
15 by 2020 or four by 2025. GM has in the past set out to make
global products, but those efforts have been disrupted by
bankruptcy or regional fiefs that demand ultra-tailored products
for particular markets.
That team needs to figure out how to make one common family of
products for markets as diverse as India, China and Brazil. Chinese
regulators are pushing for high-end vehicle advances in the near
term, for example, while Indian rule-makers are seen as very far
behind, not requiring bags in many cases.
Mr. Ammann said there is no single vehicle currently sold that
GM considers a benchmark for a leading global market vehicle. Some
emerging-market car programs, such as Tata Motors' Nano or Fiat
Chrysler Automobiles NV's Cinquencento, haven't met initial
customer expectations.
"It starts with what we call a profound understanding of the
customer," Mr. Ammann said. GM will conduct customer clinics,
surveys of dealers and forecasts of demographics. "This is really
about meeting the rapidly changing needs in these markets."
Write to John D. Stoll at john.stoll@wsj.com
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