GM to Build Diesel Engines in Thailand

By PHISANU PHROMCHANYA and JAMES HOOKWAYAugust 14, 2008;

BANGKOK -- General Motors Corp. said it will invest $445 million to build a diesel-engine plant in Thailand and upgrade an existing assembly facility, reflecting the company's increased dependence on a growing Asian market to help offset its problems in the U.S.
The plant, which will produce engines for small pickup trucks, is slated to begin production in 2010 and will have an annual capacity of more than 100,000 units, GM said. The facility will be GM's first diesel-engine plant in Southeast Asia and will produce four-cylinder engines for use by Chevrolet in Thailand and other global markets, the company said.
GM's chairman and chief executive, Rick Wagoner, said in a news conference at the site that "General Motors is intent on becoming an industry leader here in Thailand and across Asean," referring to the Association of Southeast Asian Nations, a market that includes Indonesia, Malaysia, Vietnam, the Philippines, and other countries, as well as Thailand.
Thailand's eastern seaboard -- the country's most heavily industrialized region -- is an important part of the global supply chain for several major auto manufacturers. Last year, Ford Motor Co. and partner Mazda Motor Corp. announced a $500 million investment in a compact-car plant in the same area earmarked for GM's new plant. Ford also operates a pickup-truck plant there, which exports to more than 130 countries.
Toyota Motor Corp., the world's biggest car maker, treats Thailand as a major export hub and is using it as a base to develop more fuel-efficient cars.
GM's expansion in Thailand contrasts with the difficulties it faces in the U.S. Soaring gasoline prices and a slowing economy there have curbed car sales at a time when Detroit's Big Three -- Ford, GM and Chrysler LLC -- are struggling to remain competitive with Asian rivals including Toyota, Honda Motor Co. and Nissan Motor Co. In the second quarter, GM recorded a loss of $15.5 billion -- the third-largest quarterly loss in the company's history. The company plans to close four North American truck plants and step up production at plants that build smaller cars, which are growing in popularity because of their better fuel efficiency.
In China and other parts of Asia, meanwhile, GM is hoping to increase production. In the first half of the year, the company saw its sales in the Asian-Pacific region increase 9.9% compared with the same period in 2007 to 798,000 vehicles.
The company's Asian-Pacific president, Nick Reilly, said Wednesday that GM expects to sell 1.2 million vehicles in China this year -- up from one million in 2007 -- and 220,000 vehicles in India.
The new Thai engine plant initially will employ 340 workers and is located next to GM's vehicle-assembly plant in Rayong province, which opened in 2000 and employs about 2,900 workers. The assembly plant can produce 130,000 vehicles a year, making a range of GM products, including the Aveo compact, Optra midsize sedan, Optra Estate wagon, and the Captiva sport-utility vehicle.
The assembly plant is being upgraded to produce a new, small-model pickup truck, known as the Chevrolet Colorado.
Separately, Moody's Investors Service cuts its credit ratings on GM into highly speculative territory, citing the challenges the auto maker will face in "re-establishing a competitive position in the U.S. automotive market and generating positive operating cash flow" amid industry sales that are at a 15-year low.
GM's shares were down 84 cents, or 7.6%, at $10.26 in 4 p.m. composite trading on the New York Stock Exchange.
--Mike Barris contributed to this article.