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.