GM to design new small cars in Korea to cut costs

July 31 | Updated: Aug 1 2005, 05:51am hrs
General Motors Corp, which lost more than $2.2 billion building cars and trucks in the first half of this year, will design new versions of its Chevy Aveo, Opel Corsa and other small cars in South Korea to cut costs.

GM will use its GM Daewoo Auto & Technology Co subsidiary as the base for the engineering of the new small cars, according to an internal GM announcement today. GM Spokesman Dave Roman confirmed the decision, the first of its kind by GM in Asia. He wouldnt comment on the expected investment or when the new vehicles will go on sale.

The move to Korea means they realize they can develop the cars much cheaper using Daewoo technology than they could in Europe using Opel technology, said John Wolkonowicz, an analyst at Global Insight Inc in Lexington, Massachusetts.

GM chief executive Rick Wagoner said in January that products from the Korean affiliate are central to GMs strategy of getting two-thirds of future growth in nine emerging markets, including South Korea, Mexico, Poland, Brazil and Russia. GM Daewoo, based in Bupyong outside Seoul, already exports vehicles such as the Aveo small car to the US and other markets.

Combining the Opel Corsa and Chevy Aveo engineering designs in South Korea will mean that other models based on the two cars around the world will merge, Wolkonowicz said. The Opel Corsa is the basis for the Chevy C2 in Mexico and Chevy Corsa in South America. The Daewoo-designed Aveo model includes derivatives such as the Daewoo and Chevy Kalos sold in Australia, Thailand and other markets, the Pontiac Wave in Canada and the Buick Sail in China, Wolkonowicz said. The current Aveo and Corsa models were designed independently and dont share parts or engineering. The new models will share components such as engines and axles to cut costs. They will have unique bodies for different markets.

General Motors increased its share of the South Korean unit to 50.9% in the second quarter, taking majority control, GM chief financial officer John Devine said July 20. GM didnt disclose the cost. The company paid $49 million to raise its stake to 48.2% from 44.6% in February.

The Detroit-based automaker spent $251 million in 2002 for its initial portion of GM Daewoo.

Bloomberg