Decoupling: GM Brazil having profitable '09, keeps investments
GM keeps $2.5 bln investment plan for Mercosur region
* Brazil, China seen as top priorities for GM
* GM Brazil unit has profitable 2009, after best ever 2008 (Recasts, adds priorities, sales forecasts)
By Guillermo Parra-Bernal and Alberto Alerigi Jr.
SAO CAETANO DO SUL, Brazil, June 2 (Reuters) - General Motors Corp (GMGMQ.PK) will push on with a massive investment plan in South America as the bankrupt automaker bets on expansion in up-and-coming emerging markets like Brazil, the top executive for the region said on Tuesday.
The $2.5 billion investment plan spanning 2007 through 2012 in the Mercosur region that includes Brazil, Argentina, Uruguay and Paraguay has been nearly all funded, said Jaime Ardila, GM's chief executive in the region.
The spending is focused on technology upgrades, plant expansions and developing new vehicle models.
Emerging markets such as Brazil and China have long picked up slack for lagging vehicle sales in the United States, where the worst recession in decades has forced automakers to slash production and seek money from the government to keep afloat. [ID:nT182706]
"Our biggest priorities outside the United States are China and Brazil," Ardila said at a news conference at the company's headquarters in an industrial hub just outside Sao Paulo.
The company still needs to secure $1 billion of the total investments, Ardila said. The Brazil and Mercosur unit has enough cash on hand to fund the plan but it may also seek loans from banks, he said.
"If we let banks participate in the financing, that's a future decision; but for the time being we have the necessary cash to fund our plans," Ardila said.
Brazilian business daily Valor Economico reported on Tuesday that Brazil's state development bank might turn down 700 million reais ($359 million) in loan requests by GM's domestic unit because it is barred from financing companies in bankruptcy protection.
Ardila said there were no ongoing negotiations with the BNDES or any other commercial lenders for future financing.
BEST-EVER PERFORMANCE
GM had its best-ever year in Brazil in 2008 and is also posting a profit so far in 2009, he said. Brazil sales in May rose 2 percent from a year earlier and surged 17 percent from April 2009, signaling GM's bankruptcy filing in the United States hasn't hindered its position in Brazil, Ardila said.
"We will let the facts speak for themselves," he said. "For us, it's business as usual."
The Brazilian unit will be transferred to the new GM that will be controlled by the U.S. government, he said. The unit hasn't needed any assistance from its U.S. parent since 2005 and intends to remain financially independent.
"The U.S. government will be the owner of the new GM and of GM in Brazil for some time," Ardila said.
The new GM, which will be 60 percent owned by the U.S. government, is expected to remain a private company at least until early 2010, Chief Financial Officer Ray Young said on Tuesday. [ID:nN02470428]
The local subsidiary has earned a net $430 million from technology transfers to other GM units around the world during the past three years, with $130 million alone in 2008, he said.
GM expects to benefit from global demand for fuel-efficient cars and biofuels to export its Brazilian technology for flex fuel engines that run on gasoline or ethanol and local designs for compact vehicles and smaller pick-ups.
For a graphic showing GM operations worldwide, click: here ($1=1.95 reais) (Writing by Elzio Barreto; Editing by Todd Benson and Gerald E. McCormick) |
