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GM, Ford, Chrysler entering China

Detroit’s Big Three automakers have reached trade pacts with China that allow them to export thousands of vehicles and increase their stakes in the growing market.
/ Source: The Associated Press

Detroit’s Big Three automakers have reached trade pacts with China that allow them to export thousands of vehicles and increase their stakes in a growing automotive market that eventually could become the world’s largest.

The lucrative deals reflect a loosening of import restrictions by the Chinese government as it seeks to blunt growing unhappiness in Congress over a widening U.S. trade deficit with China.

At the same time, every major automaker is trying to increase its presence in China, which this year is expected to pass Germany as the world’s third-largest vehicle market behind the United States and Japan.

“It’s by far the most rapidly growing car market in the world,” said David Healy, an analyst with Burnham Securities. “Eventually, it’s going to get oversupplied, but it doesn’t appear that’s going to happen anytime soon.”

General Motors Corp., the world’s largest automaker, said Wednesday it plans to export thousands of vehicles to China in 2004 and 2005 as part of agreements valued at roughly $1.3 billion.

In one deal, GM will export 4,500 vehicles through its subsidiary, GM China, including Cadillacs, Buicks and other brands.

“As vehicle ownership grows in China, the luxury segment is beginning to open up,” said GM chairman and chief executive Rick Wagoner. “We believe now is the right time to introduce our Cadillac luxury brand to China.”

GM said it also has signed two agreements with its flagship joint venture in China, Shanghai General Motors. As part of the first agreement, valued at $400 million, GM will supply components and assemblies for about 13,000 vehicles, including Cadillacs.

The second deal provides for GM to supply $700 million worth of component kits for the Buick Regal sedan and Pontiac Montana-based Buick GL8 wagon.

In addition, GM has signed pacts with several independent Chinese importers to import about 1,000 complete GM vehicles. The makes and models have yet to be determined. Those deals, along with the 4,500 Cadillacs and Buicks that will be exported through GM China, account for the $200 million balance of GM’s plans.

GM estimates China’s total passenger vehicle sales will grow 29 percent to 4.4 million this year. That compares with roughly 17 million vehicles expected to be sold in the United States.

GM said it sold 305,000 vehicles in China through October, 40 percent more than the same period last year. GM’s Chinese market share is about 8 percent.

Ford Motor Co. spokesman Chris Vinyard said the world’s No. 2 automaker plans to use its new import license to send 5,000 vehicles, mostly sport utility vehicles, to China by the end of 2004. Those vehicles will be sold through Ford’s growing dealer network in the country.

“We’re very pleased to participate and we hope this leads to more exports,” Vinyard said.

Last month, Ford announced an expansion of its China operations that will cost up to $1.5 billion and boost car production from 20,000 a year to 150,000.

Ford and its Chinese partner, Changan Automobile Group, plan to expand production at their factory in the western city of Chongqing and build a second car plant and a new engine plant.

DaimlerChrysler AG spokesman Trevor Hale said the German-American automaker’s import license allows it to export 4,500 Mercedes-Benz and Chrysler vehicles through 2004. The automaker has had a presence in China since 1983.

DaimlerChrysler and Beijing Automotive Industry Holding Co. in September announced a $1.1 billion deal to start producing Mercedes-Benz sedans in China.

DaimlerChrysler sold more than 8,000 Mercedes sedans imported to China in 2002, and the company expects to sell up to 10,000 units in 2003.

Germany’s Volkswagen makes 880,000 vehicles a year in China and recently announced a multibillion-dollar expansion to double that in coming years.