Local operation's productivity levels up 25%

"I'm optimistic about the future of our business, especially seeing the level of dialogue between US Congress, General Motors and the rest of the US auto industry," says General Motors (GM) African operations and GM South Africa (GMSA) president and MD Steve Koch.

US automakers - Ford, GM and Chrysler - are looking for an urgent $25-billion bail-out from US lawmakers to save one or more of them from possible bankruptcy.

Congress is still to decide whether it will grant this loan to the Big Three.

"It is clear the auto industry in the US is going through a rocky patch - not just GM, but all three.

"The economics behind it has to do with credit availability - not only to consumers [to buy cars], but also to manufacturers - as well as declining sales," says Koch.

"What GM needs is simply a bridging loan - we'll be required to pay it back - to help us through this period where there is little credit available."

Koch notes that it will be "a big mistake to speculate" what would happen if GM goes bankrupt, but adds that all operations within the group have always been expected to stand on their own two feet.

"There is no reason we [GMSA] wouldn't be able to continue operating under our own resources - there is nothing to stop us," says Koch.

He says the local company has its own funds, a strong product portfolio, the ability to distribute vehicles and parts throughout Africa, and has managed to make market share gains in a diminishing local market.

"We have had a 25% increase in year-on-year productivity," adds Koch.

GMSA manufactures the Isuzu pick-up, Corsa and Hummer at the company's Port Elizabeth plant.

However, US parent GM is currently in the process of reassessing the Hummer brand, which could include the sale of the off-road hulk.

Koch adds that GMSA's exposure to the depressed US car market is marginal, as the company is not dependent on the export of vehicles to North America.

However, the South African market has not been immune to the global downturn, with overall vehicles sales at the end of October down 18,9% on a year-to-date basis.

In line with this decline in vehicle sales, GMSA has reduced its planned production volumes across most of its product lines, and has instituted a voluntary separation programme in terms of which almost a thousand employees will have exited by year-end.

The company's plants also will be closed from December 12 to January 12, which is longer than the usual three-week period reserved for the annual shutdown.

LOCAL MARKET

Koch expects local vehicle sales to drop dramatically to 400 000 units in 2009, down from an expected 493 000 units in 2008, and the 640 000 units achieved in 2007. (This figure includes companies which report to the Association of Automobile Manufacturers only, and not Korean and Chinese importers.)

"We expect our market share to hold at around 13,8%."

Koch says GMSA's production volumes in Port Elizabeth should dip to around 45 000 units in 2009, down from a level of just over 50 000 units in 2008.

The bad news for consumers is that Koch expects the average price of passenger vehicles in South Africa to jump by 20% to 25% in 2009.

GMSA sells the Hummer, Chevrolet, Opel, Cadillac and Isuzu brands in South Africa.