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GM Prepares to Make Minivans
At Assembly Plant in Shanghai

By ROBERT L. SIMISON
Staff Reporter of THE WALL STREET JOURNAL

DETROIT -- General Motors Corp. is preparing to add minivan production to its oversized but underutilized new vehicle factory in Shanghai, according to individuals in the auto industry with knowledge of the matter.

The move, which is still subject to approval by the Chinese government, could help solve the biggest riddle facing the $1.52 billion joint-venture project: How to make the investment pay off. Right now, the plant is licensed to build only full-size Buicks, for which the market has shrunk sharply since GM signed up for the venture in the early 1990s.

Representatives for GM declined to confirm the company's plans. "We don't talk about future product programs, and we don't have permission to build anything beyond Buicks" at the Shanghai plant, one spokesman said in Detroit. The spokesman said GM would clearly need government approval.

However, GM already has ordered stamping dies for making minivan body panels and other parts for the Shanghai plant, said an individual in the automotive tooling industry. The dies are said to be coming from Japan's Ogihara Corp. and from a South Korean supplier. In Japan, Yasuhiro Sakazume, an Ogihara sales manager, confirmed the company won a contract from GM to build minivan dies for China.

Ordering such expensive hard tooling signals GM is committed to the program. Stamping dies for auto-body panels are made out of huge slabs of super-hard steel that are precisely carved, smoothed and polished into the exact shape of the parts they are intended to produce from flat pieces of sheet metal. The value of the Ogihara deal for the China plant, for example, was said to be in the tens of millions of dollars.

Minivans represent a promising addition for the factory, industry experts say. "Minivans are considered very good in China because they are viewed not as personal transportation but as vehicles that can carry a lot of people, as taxis or as shuttle buses," said Nicholas Colas, an auto analyst for CS First Boston.

Yet any additional investment in the Shanghai project could only compound GM's risk. One reason that sales of Buicks are projected to hit only one-third of the plant's 100,000-vehicles-a-year capacity is that the central government restricted car purchases by government officials in a cost-cutting move. That reflected the country's slowing economy and concern about the outlook in a recession-plagued region.

The Chinese government may well acquiesce to GM's minivan project, partly because earlier plans for a joint-venture minivan have so far been foiled and partly because GM's partner in the Buick plant, Shanghai Automotive Industrial Corp., originally wanted the venture to include minivans.

For the China market, GM's Shanghai plant is expected to build a minivan similar to the Sintra front-drive minivan, which is slightly smaller than the models GM sells in North America. The Sintra, built at GM's Doraville, Ga., minivan assembly plant, hasn't been a hit in Europe and is being phased out in favor of the compact, German-made Zafira minivan. Industry experts say GM could start production of minivans in Shanghai in 2000.

In preparation for the move, GM has been sending Chinese workers for training to its Doraville assembly plant. Factory workers at the Shanghai plant say they have been trained in minivan assembly. While confirming the company has brought workers from China to Doraville and other U.S. plants, a GM spokeswoman said that was part of a general training program in manufacturing processes and wasn't related to any future plans for Shanghai.

--Craig S. Smith in Shanghai and Norihiko Shirouzu in Tokyo contributed to this article.