GM bankruptcy 'wouldn't affect GMSA'

09 April 2009

JOHANNESBURG (BuaNews) - The possible bankruptcy of US automotive giant General Motors would have minimal impact on General Motors South Africa (GMSA), as the local unit generated its own cash and was responsible for its own viability, the company said this week.

"We are responsible for funding our own operations and do not rely on any direct financial support from North America," GMSA MD Steve Koch said in Johannesburg.

Given the small overlap of product portfolios between GMSA, the North American market and the financial independence under which GMSA operated, there were few implications for the South African market, he added.

"Approximately 95% of GMSA's total sales were derived from markets outside North America," Koch said.

Continued commitment, investment

Customers could also be assured that GMSA would continue to honor its warranty and after-sales commitments. "South Africans don't need to worry as we will live up to our warranty," he said.

While GMSA sourced many components for assembly from local suppliers, Koch said the majority of Isuzu components were sourced from Japan and Thailand and Corsa Utility components from Brazil, while the Chevrolet products were imported from Korea and Australia.

Each of these locations had their own design and engineering capabilities and operated independently from North America, he said.

Koch added that the company has continued to invest in its distribution infrastructure, including a new R150-million vehicle conversion and distribution centre and a new R220-million pan-African parts distribution centre at the Coega Industrial Development Zone set for construction early in 2010.

Decline in sales

Koch said that during the course of 2008, the company had made significant changes in line with the deterioration in vehicle sales, and had begun a reorganisation of its business in May.

The National Association of Automobile Manufacturers of SA reports that new vehicle sales dropped 30.3% year-on-year in March, despite recent interest rate cuts. Sales of vehicles exported from South Africa to the flailing US, Japanese and European markets also continue to slump.

"Unfortunately the market deterioration has continued into 2009 to the point where we have no other option but to contemplate forced retrenchments," Koch said.

Last week GMSA indicated it would retrench 700 workers. Current job losses are estimated at more than 35 000 people in the automotive industry in South Africa.

Motor industry assistance

Meanwhile, the government has tasked an auto industry task team to draft a strategy aimed at assisting the local industry. It is expected to present its proposals to Trade and Industry Minister Mandisi Mpahlwa during the course of this month.

Since 2005, General Motors in the United States has lost more than R800-billion and has been kept afloat by an emergency loan of R130-billion from the government.

It has requested a further R160-billion from the US government. However, chances of a government bailout of GM in the US took a knock after the White House determined that its turnaround plan was too vague.