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'We're okay' - GMSA chief

2008-12-03 14:51
GMSA interview: Global issue
GMSA interview: Hummer, Saab sale?
GMSA interview: Future in SA

Wheels24 spoke to Steve Koch, the president and managing director of GMSA about the prospects of a bailout for General Motors, Ford and Chrysler in the US, the impact of its parent company on local operations, the future of Hummer and Saab, and GMSA moving forward.

Wheels24: Things are not looking good for GM in the US; it's been sent begging for money to remain alive after its initial bid - along with Chrysler and Ford - failed. Do you think the latest request (a cash injection of $4bn plus a further $18bn) will be successful? What happens if it's not?

Steve Koch: All manufacturers in the US are struggling, and its not just General Motors, or Ford or Chrysler, even Toyota is struggling, and that's key. But it's encouraging to see the widespread recognition of the important role the automotive industry plays in the US.

It contributes 4% of GDP, 10% of employment and 20% of consumer sales; if the industry were to fail it would be devastating. I'm happy to see (the US) Congress is seriously considering assistance and I continue to be optimistic.

W24: Fritz Henderson, president of General Motors Corp., recently mentioned in a press conference that the company would going forward focus on its core brands and possibly drop the number of nameplates from 63 to 40 by 2012. The apparent abundance of brands within the GM stable has been a sore point for critics for some time now, but is the latest announcement not perhaps a case of being too little too late, especially in light of the fact that GM, by it's own admission, may not survive if it does not receive the urgent $4bn cash injection by the end of 2008?

SK: The competition has become a lot more intense, it's an open market and there is a big desire to get into the largest automotive market in the world. Where we (GM) held 49% of the US market share at one point, things have changed since then. It's difficult to unwind a distribution network; over the years the dealership and sales network is established, suppliers and the supplier network are integrated and it's about peoples' jobs, too.

W24: Hummer and more recently Saab are up for sale in what is essentially a buyers market. What are their chances of survival without new buyers?

SK: Hummer and Saab are subject to a, and I think the term used is, "strategic review" and the idea is if they were to fit better into a niche environment outside of the mass production environment of General Motors then that should be explored. I do know that bid packages have been provided to interested parties, although there hasn't yet been a response.

Both brands enjoy a very high level of loyalty from consumers, and I have no doubt that whoever buys either Hummer or Saab will protect the brands, and protect consumers. 

W24: And the impact of a Hummer sale, of which H3 is produced in the Eastern Cape, on local manufacturing?

SK: Hummer, when it was initially installed was important for the MIDP (motor industry development programme) and as part of GM's integration into South Africa.

But where the MIDP was focused largely on exports, the APDP (automotive production and development plan that will replace the MIDP from 2013) is focused on volume and local content.  

The Corsa Utility and Isuzu KB, with production of around 25 000 a year, already have a high base for APDP.

H3 may not be the right fit for manufacturers. It is the right fit for the market, it's the right fit for buyers, but figures of 8 000 units a year may not make it the right fit for production. I don't see it forming part of our future production portfolio.

W24: With all the drama playing out in the US, how is GMSA faring? Are you finding that, particularly for people watching the way in which the assistance talks are going in the US, the fear of impending bankruptcy may be scaring consumers off?

SK: GM Corp is the holding company for various businesses. We have several self-sustaining businesses and have been doing this for the past 80 years. As a growing concerning, we're definitely planning for the future.

We're not wholly dependent on the US market, the majority of our products are sourced from the Asia Pacific region with some from Latin America and Europe. Our distribution network is the strongest and we recently opened a R220 million distribution centre for South Africa and other parts of Africa to support this growth.

GMSA showed nine models and concepts at the Johannesburg International Motor Show, and five of those will be here within 18 months. So there is no reason for anyone to avoid purchasing at this time.

We've taken some pretty strong measures this past year, including voluntary separation packages for 1 000 employees, that have seen us achieve a 25% improvement in productivity since January.

W24: What is GMSA's biggest challenge going in to 2009?

SK: 2009 will be a very difficult year. We're only now seeing the impact of the global economic problem.

Locally we've seen the contraction from levels around 600 000, we’re projecting 490 000 for this year and 400 000 for 2009.

We'll need to manage our cash and distribution network, and maximise aftersales and used vehicles well into 2010, I think.

W24: Rick Wagoner (GM's CEO), Alan Mulally (Ford's CEO) and Bob Nardelli (Chrysler CEO) have said they would accept a $1 salary if it mean the US Congress would offer the Big Three aid. Would you be as generous if the same were to happen in South Africa?

SK: (Laughs) I would definitely be that generous. But I'm very positive that that will not happen to GM South Africa. 



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