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GM to focus on growing China market
Wednesday February 11, 11:00 am ET
By Richard McGregor in Shanghai

China is on track to overtake Japan "in a couple of years" to become the world's second biggest vehicle market, according to John Devine, General Motors' chief financial officer, in the US vehicle maker's latest bullish assessment of the mainland.

Mr Devine said during a visit to Shanghai on Wednesday that GM had consistently "under-called" the pace of growth in China and the company was determined to expand capacity and release new models to keep up with the market.

China's production of cars and commercial vehicles was 4.4m last year, an increase of 35 per cent on 2002, compared with just over 6m in Japan.

Mr Devine said GM expected the market to maintain double-digit growth "for some time" on the back of continuing economic growth, cheaper cars and the approval of vehicle financing for three foreign manufacturers.

GM China sold 386,710 vehicles in China last year through its various joint ventures, up 46 per cent on 2002. Saloon car sales increased 82 per cent year-on-year.

GM's joint venture with Shanghai Automotive Industry Corp (SAIC) had an inventory of just 4,000 cars at the end of last year, or about six days' worth of sales. This compares with a norm in global markets of 60 to 80 days.

In spite of its success, GM is grappling with a number of sensitive problems, including the alleged piracy of the designs of two cars from its South Korean Daewoo unit by Chery, a relatively new entrant into the car market, which is based in Anhui province.

Mr Devine did not rule out GM taking legal action against Chery but said that the central government was trying to help it solve the issue.

"It's a very murky area that we are trying to work out," he said.

Mr Devine also said GM was working on a change in the ownership structure of Jinbei-GM, its troubled 50 per cent owned SUV venture in Shenyang, northern China. Annual production at the plant is only about 3,500 vehicles a year, in spite of capacity of more then 30,000 units.

"We're working on some solutions for Jinbei and I think we'll get them [the problems] resolved," said Mr Devine, who added that SAIC was involved in the discussions to join the venture.

Mr Devine said GM had dropped out of the recent competition to buy Ssangyong, South Korea's fourth-largest vehicle maker, as the bidding price was "too high".

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