GM Invests $1.1 Billion. In Brazil

GM is tired of playing third fiddle in the growth market of Brazil. Come on, being outdone by Italians and Germans? Gotta pay to play, so GM do Brasil announced a new investment package for operations in Brazil. That according to car site Webmotors. The money will be pouring in to the tune of R$2 billion or US$1.1b. GM corporate honchos said R$1.4 billion (US$777 million) will go to raise production capacity and modernize its plant in Gravataí, Rio Grande do Sul. The gaúcho plant now produces the Celta and derivatives. The objective, according to the suits, is to (finally!) retire the Celta line in Brazil and other emerging markets and substitute it with the Onyx family line. Will that get GM ahead?

According to my last post, the Celta family line (based on the first generation Corsa) is responsible for GM’s only 2 inclusions in the top 10. The best the only member of the Onyx line so far (the Agile) can muster is the 13th spot. I foresee a lot of cost-cutting (cheapening to be exact) at a moment when GM’s competitors in Brazil are actually improving their cars’ interiors (VeeDub’s new Gol and Fox, Fiat’s new Uno, Renault’s newish Logan, though Ford not so much).

GM predicts that with the new money, the plant will raise production from 230 thousand cars a year to 380 thousand. The rest of the money (R$600 million or US$333 million) will be applied to improvements to the São Caetano do Sul, São Paulo state factory and also to their proving grounds in Indaiatuba, São Paulo state. This investment will help GM renew all of its product line until 2012.

Not a moment too soon if you ask me. Right now, GM is struggling to hold on to its 20 percent market share and facing an onslaught of refreshed or totally new products from all competitors. How much GM will lose until the results of this investment comes true is anybody’s guess. Likewise: Where does GM keep coming up with this kind of money? And don’t let the Germans hear that GM has cash to invest abroad.