Major car producers split on booming Asian market

Major car producers split on booming Asian market

MANILA (UPI): Asia's vehicle markets are moving steadily into
higher gear as incomes rise, but there's a sharp divide among
main producers about how best to capitalize on the demand.

General Motors Corp. officially laid the foundation stone at
the end of November for its US$750 million assembly plant in
Thailand, which will serve as a main export center for the
region.

The first cars -- specially tailored for Asian conditions --
are due off the line in early 1999.

Ford Motor Co., by contrast, is backing the "Asia car"
concept, as are at least two of the big Japanese firms. Skeptics
say this one-size-fits-all approach risks producing something
with so many compromises that no one is entirely happy.

GM firmly resists that temptation. It prefers to modify its
best-selling Opel models made in Germany for particular
conditions, said Andrew Andersz, the company's regional spokesman
in Singapore.

"We beef up the air conditioning and suspensions to take
account of the reality out here. Instead of the high-performance
tires Europe likes, we use something more robust. Even the
dashboard material is made to stand 12 hours of broiling sun," he
said.

GM will offer models with both left hand and right hand drive,
the latter being far more common in Asia. The company
increasingly relies on the engineering expertise of its Holden
Motors unit in Australia to tailor regional vehicles.

"We believe we must build in the region for the region," said
Andersz. In addition to making sure cars fit markets, "the costs
are higher in Europe and the delivery time is longer than making
them here."

GM is looking to establish the global enterprise supplier
concept which integrates existing worldwide suppliers of the
company. Ron Frizzell, president of GM Thailand, says this
strategy aims to assure GM of a consistent supply of parts.

Ford has a plant near GM's new site in Thailand, a joint
venture with Japan's Mazda Motor Corp., which it now controls.

The Dearborn, Mich., company has concentrated thus far on its
Escort range made at U.S. and European plants. W. Wayne Booker,
Ford's vice president for business development in growth markets,
said recently that any Asian car it produced would be cheaper and
more utilitarian than competing models from Japan.

Industry analysts say that's the problem. "It may not be as
stripped-out as earlier attempts, nor as much as potential
customers might think, but it must be a compromise," said one.

Honda Motor Co. recently introduced its City model in the
Philippines as part of an Asian push. It is backed by heavy
advertising and is seen as generally attractive, but it's too
soon to judge what sales might be like.

Toyota Motor Corp. announceu plans for an Asian car at about
the same time, but hasn't yet begun selling them. Both are in the
1.3-liter (80 cubic inch) class and aimed at first-time buyers.

GM is looking ahead to the next step in regionalizing its
production-- a plant to make engines and transmissions, now
imported from Europe elsewhere in the region.

G. Mustafa Mohatarem, GM's chief economist, said during recent
regional economic meetings here that it could involve investment
of between $350 million and $400 million. Talks were held during
his visit with Philippine government officials, who lobbied hard
for the plant that eventually went to Thailand.

"No decisions are likely for some time, but the Philippines
will be a very strong possibility now that we've done all the
preliminary investigations," Andersz said. The Philippines is
also a candidate to produce some parts.

In a speech to a gathering of regional business executives,
Mohatarem criticized protectionism in some Asian countries, which
he said frustrated Western car manufacturers in tapping
potentially big markets. He urged Asian countries to adopt
policies in line with regional trade blocs' goals to liberalize
trade and investments.

As well as blunting market access, protectionist tendencies
make it "very difficult for us to achieve economies of scale," he
said after his prepared speech to an business council.

Mohatarem particularly criticized Indonesia's policy
giving preferential tariff exemption exclusively to a joint
venture between a son of President Soeharto and South Korea's KIA
Motors Corp.

The Indonesian policy forced GM to stop one of two production
lines as manufacturing became too costly. GM, some Japanese
carmakers and the European Union are threatening to take the
matter to the World Trade Organization, the global referee of
fair dealings.

Countries maintaining high levels of protection "tend to
attract a large number of small, inefficient assembly plants,"
the GM economist said.

There are 15 vehicle assemblers in Indonesia, 14 in the
Philippines, 13 in Thailand and 10 in Malaysia. The largest,
Malaysia's Proton, produced under 130,000 units in 1995, fewer
than the smallest production in the United States and much of
Western Europe.