General Motors in joint venture with China FAW

gmGeneral Motors Co. said Sunday it has established a 2 billion yuan ($293 million) joint venture with China FAW Group Corp., adding a new vehicle segment to its portfolio in the world’s fastest-growing auto market.

The joint venture, FAW-GM Light Duty Commercial Vehicle Co. will make FAW-branded light-duty trucks and vans, GM said in a statement. It will also engage in research and development, exports and after-sales support.

The new joint venture is an important complement to GM’s product line-up in China, said Kevin Wale, president and managing director of GM China Group. China accounts for 50% of global light truck sales and is a “key focus” for GM, he said.

“It’s a large country, it’s got a lot of people and there’s lots of small trading going on,” Mr. Wale said.

The total investment in the joint venture is 2 billion yuan and it has a registered capital of 1.2 billion yuan, the company said.

GM also makes passenger vehicles in China with SAIC Motor Corp. and minivans with SAIC and Wuling Automobile Co.

FAW-GM includes FAW’s wholly-owned Ha’erbin Light Vehicle Co., which is located in Harbin, in the northern Heilongjiang province, and FAW’s share in Hongta Yunnan Automobile Manufacturing Co., in Qujing, in the southern province of Yunnan.

Through those companies, the venture already has two plants with an annual capacity of about 100,000 vehicles. GM-FAW are building a new plant in Harbin that will increase the venture’s annual capacity to 200,000 units by the end of 2010, Mr. Wale said.

The venture expects to sell between 80,000-90,000 units this year, including vehicles already sold so far by Ha’erbin and Hongta, and is targeting sales of more than 100,000 units next year, he said.

FAW is China’s second-largest car maker by sales volume. It also operates vehicle-making joint ventures in China with Volkswagen AG and Toyota Motor Corp.

GM and FAW began discussions on the joint venture in January 2007. They signed a memorandum of understanding in November 2007 and signed a joint venture contract the next month. In July 2009, the joint venture received approval from China’s central government, GM said.

Mr. Wale also said GM is revising its sales forecast for the full year for China, based on stronger-than-expected sales here.

In June, Mr. Wale said the U.S. auto maker’s sales here would grow by at least 20%. In 2008, GM’s sales in China grew 6.1% to 1.1 million units. In July, the company’s China sales rose 78% to 144,593 vehicles. Sales in the January-July period rose 42.8% from the same period last year to 959,035 units.

Source: WSJ

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