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GM says China operation unaffected by bankruptcy

(Agencies)
Updated: 2009-06-02 14:11

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General Motors Corp.'s fast-growing China operation will be unaffected by the parent company's bankruptcy and plans to open a new factory within five years will not change even as the automaker closes US facilities, the unit's president said Tuesday.

GM China is sticking with a five-year plan to double annual sales to 2 million units and roll out 30 new or updated models, Kevin Wale told reporters. He said China is not included in GM's petition Monday for court protection from creditors and the unit's business plans are fully financed.

"Our operations are separate, they are profitable, they are well-funded, and we generate our own funds for future investment," Wale said from Shanghai in a conference call. "We do not see any change to our growth activities."

GM is one of the biggest automakers in China, where strong sales have been a rare bright spot for global producers as demand elsewhere plummets. China's monthly sales have surpassed those of the United States so far this year.

General Motors CEO Fritz Henderson (C) is surrounded by reporters after addressing the media at a news conference following GM's bankruptcy filing in New York, June 1, 2009. [Agencies]

GM China's sales in the first five months of the year rose 33 percent from the same period of 2008 to 670,000 vehicles, Wale said. He said May sales surged 75 percent from a year earlier to 156,000 units.

Demand is so strong that GM China expects to add a factory within five years but has made no decisions about a location or other details, Wale said. GM has eight joint ventures in China with local partners.

Wale said GM expects strong sales to continue for at least the next two months but conditions after that are uncertain. He said sales have been boosted by China's multibillion-dollar stimulus spending.

"You never know what is in front of us. So we prefer to be a little prudent at this stage," he said.

Detroit-based GM filed Monday for Chapter 11 reorganization for its US operations and said it hopes to emerge in 60 to 90 days with fewer employees, factories and dealers. The company says it will close or idle 12 plants.

China is GM's second-largest national market after the United States, followed by Brazil, the United Kingdom, Canada, Russia and Germany.

GM China will take steps through its Chinese joint-venture partners and dealers to reassure customers that warrantees, service and financing will be unaffected, Wale said.

Beijing has cut sales taxes and is offering other incentives to promote purchases of smaller vehicles, an area where GM China is strong.

The unit should be unaffected by GM's agreement to sell most of its European subsidiary Opel, Wale said. Several models sold in China are based on Opel vehicles or share parts, but he said the companies would continue to cooperate under new ownership.

"The technology for the vehicles we sell is held by General Motors, and I don't see any implications from the new structure in Europe," he said. "We intend to continue to share product knowledge and product capability."

Wale said GM is expected to make an announcement "imminently" about its Hummer unit, but he said he did not know the outcome.

General Motors has an Asian regional product-development center and an alternative-fuel research center in Shanghai, the center of the country's auto industry.

GM has no immediate plans to export Chinese-made vehicles to the United States, Wale said.

"The focus right now is to increase production in the US not outsource it to the rest of the world," he said. "At some stage in the future, there is no doubt that we will expand, with some exports, but I do not see that happening in the foreseeable future."