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BW Businessworld

Bankrupt GM Bullish On Asia...

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Bankrupt General Motors Corp said Chinese sales jumped 75 per cent in May, but it warned further expansion in Asia-Pacific depended on the region's success in raising money in a difficult credit environment.

With its regional sales surging 44 per cent to a record last month, GM is looking to invest more in countries such as China, India and Thailand, which executives said could all one day serve as export bases.

As part of the 100-year-old automaker's historic bankruptcy filed on Monday, the US government is set to own 60 per cent of a new and leaner GM, meaning its international operations are cut off from funds from the parent company.

"Life has changed in the last six months," GM Asia Pacific President Nick Reilly said on a conference call on Tuesday.

Reilly said that while China's cash-generating joint ventures could fund their own expansions, GM's Thai and Indian units were in urgent discussions to line up financing to complete projects that had been planned for some time.

In India, most of the $200 million needed to complete a new engine factory and other projects had yet to be raised, Reilly said. But GM was pursuing "two other potential sources of financing", he said, and expected no delays for the projects. He declined to elaborate.

In Thailand, GM said it hoped to conclude talks with local banks within 90 days on commercial loans for its $445 million new diesel engine and truck assembly plant project.

"We are quite optimistic about the progress of the talks," Steve Carlisle, GM chief executive for Thailand and South East Asia, told a news conference in Bangkok.

The project's construction had been suspended since late last year when the global financial crisis forced the Detroit headquarters to seek a bailout.

Easing some financing concerns also in South Korea, the head of GM Daewoo Auto & Technology said the unit expected an agreement on financial support from its biggest creditor, state-run Korea Development Bank (KDB), in two to three months.

CEO Michael Grimaldi added GM Daewoo planned to keep annual investment steady at around 1 trillion won ($811 million).

GM's European arm Opel will start receiving financing from Germany on Tuesday after clinching a deal with Canadian auto parts group Magna, GM and the US and German governments on Saturday to shield Opel from the bankruptcy of its US parent.

Driver For "New GM"

Despite the financing hurdles, GM executives, in news conferences held separately across Asia, stressed that the lower-cost Asia-Pacific operations would be a crucial driver for the "New GM" that is expected to emerge in two to three months.

"We are safe. We are part of the new GM," said Mark Reuss, head of Australian operation GM Holden, adding that none of GM's 6,000 jobs in Australia would be cut.

In contrast to the overcapacity problems in North America -- GM plans to close or idle 14 US plants and warehouse operations -- the automaker said it would need another factory in China within five years to meet its goal of selling 2 million cars in what has become the world's biggest auto market.

Kevin Wale, president of GM China, also said that if the phenomenal growth continued this month, GM may have to lift its target of expanding 2009 sales by up to 10 per cent. Last month, sales surged 75 per cent from a year earlier to 156,000

(Reuters)