GM Is Turning Brazil into Biofuel Car World Leader

Chevrolet's FlexpowerGeneral Motors, in spite of its misfortune or long standing
mismanagement in the US, has built a thriving powerhouse operation in
Latin America, where its fuel-efficient vehicles are playing a crucial
role in returning the battered company to health.

For Latin American consumers GM remains a respected brand with one of the highest market share, 21%, overall in the region. And while GM sales declined 23% last year in the US, they rose 3% in Latin America, and thanks to some timely government support, this year's sales are on track to match 2008's.

The automaker has been in the region for decades, opening its first factory in Argentina in 1925. It has kept ahead by continuing to invest billions of dollars, including on a new assembly plant in Mexico and a design center in São Jose dos Campos, Brazil, that GM hopes will become a source of cutting-edge know-how for gas-sipping cars it may someday sell in the United States.

GM Brazil operation, second only to its China outfit in foreign unit sales, has helped keep Detroit afloat. The company has "repatriated" annual profits of up to US$ 800 million in some years this decade, at a time when GM US operations were bleeding cash, informed sources say.

Brazil has become a crucial stop on the career paths of company brass. GM Chief Executive Fritz Henderson and his predecessor Rick Wagoner both headed operations there earlier in their careers, and both have said that because of the region's size, complexity and importance, it's an invaluable training ground.

"The Brazilian operation of GM is one of the most successful in the world," said Alexandre Andrade, an economist at Tendências, a São Paulo think tank.

Analysts expect GM to make Brazil, a world leader in vehicles that use ethanol and other biofuels, a key element of its survival plan, particularly in light of new fuel efficiency requirements being laid down by the US government.

GM has announced investments totaling US$ 1.5 billion, much of it for a flex-fuel motor plant under construction in the southern state of Santa Catarina.

The first flex-fuel car model developed at the São José dos Campos research center is called the Prisma and will soon be in showrooms in Brazil. It is also slated for export, although GM has not said where. GM's Brazilian cars, including the Chevrolet Astra and Corsa models, are exported to Mexico and other Latin countries, though not to the United States.

The Brazilian government is pushing for its car industry to become a global exporter of 1 million cars a year. Overall Brazilian exports peaked at nearly 900,000 cars in 2005.

One element of uncertainty is that GM's Brazil operation has licensed the right to produce several small car models from the company's Opel unit, which was recently sold to a consortium of bidders led by Canadian auto parts maker Magna International Inc.

But because GM will retain 35% of Opel and is likely to retain control over much of the intellectual property developed at the European division, the Brazilian operation will probably still have the right to those designs.

GM has also invested big in Mexico, where it has 13,000 employees and four assembly plants. The newest is the one billion US dollars facility that opened in San Luis Potosi last year, which makes the Chevy Aveo subcompact for the Latin American market.

GM Mexico is a major supplier of cars and trucks to the US market. The unit exported just over 387,000 vehicles last year, most of which ended up in US showrooms. Most of the automaker's Mexican exports are SUVs and trucks, including the Saturn Vue, Chevy Suburban, Cadillac Escalade, Chevy Yukon, Chevy Silverado and GMC Sierra.

Those vehicles aren't selling well at present, and exports this year have plunged. But analysts said they don't believe that GM's Mexican operations are vulnerable to sale or closure. On the contrary, analysts said that with their low wages, high productivity and proximity to the US market, those facilities stand to gain production lost in the United States.

Mercopress

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