Model of the new engine plant which
will start operations in 2010

General Motors (GM) is moving into the next phase of its growth in the ASEAN region after making the first major investment in the mid-1990s. Back then, GM had decided on Thailand as its regional manufacturing base to serve the ASEAN area which would become a single market known as the ASEAN Free Trade Area (AFTA). The fair, forward-thinking and consistent policies of the Thai government made it a choice of many foreign automakers who were keen to exploit the benefits of AFTA which provided for intra-ASEAN trading at a common tariff (import duty) of just 5% for vehicles made in any country in the region. As such, GM decided to spend US$750 million (almost RM1.9 billion in those days) to build a full-scale manufacturing facility which today produces 130,000 units of cars and pick-ups annually.
 

Last week, the company announced that it will make a further investment of US$445 million (about RM1.5 billion) in its Thai manufacturing operations. Of this sum, US$200 million will be spent to build an additional plant to make diesel engines while the rest will be for upgrading the existing plant and also for engineering work on the second generation of its Colorado pick-up truck.

The new 14,492 square-metre plant, which will begin operations in 2010, will be GM’s first diesel engine plant in Southeast Asia and will initially make 100,000 – 120,000 4-cylinder turbodiesel engines annually. These engines will go into future models sold in ASEAN and about 10% will also be exported to GM plants in other countries.

 

The new turbodiesel engine is likely to be in 2.5-litre and 2.8-litre displacements

Details of the new engine to be made in Thailand are limited but it is known that they will have 2.5 and 2.8-litre displacements. They were developed in collaboration with Italy’s VM Motori which is 50% owned by GM in a joint-venture with Penske Corporation. Preliminary output numbers are expected to be as high as 175 ps and 440 Nm.

It is unlikely to go into the Captiva SUV of this generation although it is possible that the next generation may have an engine from the plant. Truck engines and SUV engines require different characteristics and it appears very much that the first engines will be for trucks.

GM is also likely to export (if not assemble locally) the next generation of the Colorado to Malaysia, which means 2010 onwards. The current generation cannot be sold in Malaysia due to some agreement it has with Isuzu, with which it shared the development of the model. The next generation will still be jointly developed with Isuzu but will use GM’s own engines and also have greater differentiation in many areas, according to a GM executive.

GM officials do not rule out making smaller diesels at a later date (and GM has some very good ones in Europe among the 22 different diesel engines it current offers) but prefer to focus on these medium-sized displacements initially as they are not available elsewhere. Furthermore, as the Thai market is a largely a pick-up market, the engines chosen are the most appropriate.

According to Steve Carlisle, President for General Motors Southeast Asia Operations and Chevrolet Sales (Thailand), “The new facility will be a state-of-the-art, highly flexible and people-focused production complex that incorporates GM’s leading manufacturing strategies. We are bringing the best GM has to offer to ensure that our customers receive the cleanest and most efficient diesel engine technology available. Add to this our work with CNG, cellulosic ethanol, bio-diesel and regular petrol, and it is clear that General Motors is quickly becoming the energy diversity vehicle manufacturer in Thailand.”

 

Scenes from the official announcement ceremony in Rayong, Thailand, last week

GM’s investment in Thailand once again shows how irrelevant Malaysia is becoming as a place for carmakers to make major investments. They may set up local assembly facilities since that is necessary to have competitive prices but for large-scale investments like a manufacturing facility to serve the region, the conditions set by the Malaysian government are unacceptable and don’t make commercial sense. Government officials keep urging carmakers to consider Malaysia as a regional hub but fail to provide an environment where the playing field is truly level.
 

It should be remembered that carmakers do not set up factories in a country with the primary aim of exporting most of their production. They do so firstly to cater to the domestic market and then look at exports. Malaysia, which keeps boasting of having the largest passenger car market in ASEAN, should, by right, be attracting many carmakers to make their products here but few are coming because they have often been told that they should export 80% of their output. If this is the case, then why should they waste their time and money building a factory here?
 

As mentioned earlier, GM’s is moving to the next phase in its ASEAN operations, 10 years after it started. Other manufacturers would be doing likewise and if the Malaysian government had any understanding of how the industry works, it would have been seriously looking at – and announcing – better and fairer policies a few years back. Billion ringgit investments are not approved overnight and are the subject of years of planning but it seems that the government assumes that they can announce a change in policy and carmakers will start building factories the following year (assuming the policy is an investor-friendly one). It doesn’t work like that and now that 10 years have passed since the original investments were made, the next wave of investments are already coming – and it could be that Malaysia has again missed the boat.

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