GM, Daewoo Form 2 More Joint Ventures : To Produce Auto Parts in S. Korea Starting in ’86
General Motors, expanding its stake in the fledgling South Korean auto industry, said Thursday that it has formed two more joint ventures with Daewoo Group, a large Korean conglomerate, to produce auto parts in Korea beginning next year.
Along with a third parts-making joint venture announced in 1984, the two new projects will supply components to the $420-million car assembly operation that GM is now building with Daewoo in Korea. That assembly plant is expected to produce 167,000 small cars annually--with about half to be exported to the United States for sale by GM’s Pontiac division--beginning in the 1987 model year.
With its growing list of investments in the small Korean auto industry, GM is clearly attempting to get in on the ground floor in a country that hopes eventually to challenge Japan as Asia’s most efficient and lowest cost auto exporter.
Industry Growing Fast
Korea still only has the capacity to produce about 500,000 cars and trucks a year, but its industry is growing fast. Already, Hyundai Motor Co. of Korea has become an overnight success as an importer into the Canadian market, and the company is now in the process of setting up a dealer network in the United States. It plans to become the first Korean car company to enter the U.S. market when it introduces its Excel subcompact model here early next year.
GM’s expanded ties with Daewoo also come at a time when the No. 1 auto maker is relying more heavily than ever on Japan for its supplies of small cars, and its presence in Korea would seem to give it an alternative source for subcompacts just in case tighter trade restrictions are imposed by the United States on Japanese imports.
GM and Daewoo said Thursday that the South Korean government has given its approval to a $100-million joint venture between Daewoo Precision Industries Ltd., a subsidiary of Daewoo Group, and three of GM’s U.S. divisions--Delco Moraine, Harrison Radiator and Saginaw Steering Gear--to produce steering gear, axle, brake, radiator and air-conditioning components in a new plant that will be built near Taegu, Korea.
Last year, GM’s Delco Remy division agreed to form a separate $60-million joint venture in Korea with Daewoo Precision to produce alternators, cranking motors and ignition components at another new plant near Taegu for use in the joint-venture car.
Plan to Export Parts
Also Thursday, GM and Daewoo said they have received governmental approval for a $20.5-million joint venture between Korea Steel Chemical Co., another Daewoo subsidiary, and GM’s Fisher-Guide division to produce car bumpers. A new plant will be constructed in Korea for the joint venture, but a site hasn’t been selected, Daewoo said.
While most of the parts manufactured by the joint operations in Korea will go to supply the GM-Daewoo assembly plant, GM officials said they also plan to export those parts to other automotive operations throughout Asia. Only one component--an air-conditioning compressor--will be exported to the United States for use in domestically produced cars, GM said.
That part is currently produced at a Harrison Radiator plant in Dayton, Ohio, but GM officials insisted that the U.S. facility will continue to make the compressors and remain open.