Shanghai GM's First Buick Rolls on Dec. 17

Let the rest of the world worry about Asia's economic future. Shanghai GM, the $1.5 billion joint venture between General Motors Corp. and Shanghai Automotive Industry Corp., is close to Job 1.

Philip Murtaugh, vice president of the 50/50 joint venture, expects the first Chinese Buicks to roll off the line on Dec. 17 with 40% local content now and 65% within two to three years. Despite slower economic growth, GM officials are convinced there will be strong demand for the car among affluent Chinese.

For the first three months, workers will be assembling pilot cars so they can find glitches in the production process and correct them. They will build cars that are good enough to sell beginning in April 1999. Customers, many of whom will be government officials, probably won't see them on the street until May or June, says Mr. Murtaugh.

"We want a very controlled acceleration program," he says. "We want to focus the first year on the production process and quality."

Mr. Murtaugh expects the plant to build 20,000 cars next year. Eventually, management hopes to produce 100,000 cars annually.

Production began in October on the first automatic transmission made in China. By building such a key component in China, Shanghai GM meets China's strict local content requirements through which any automaker minimizes any tariffs it pays to sell vehicles in the world's most populous country.

GM executives in Shanghai say that while they are right on schedule, they have scaled back sales forecasts due to China's economic slowdown.

The venture also faces tough times as the market for cars used by state authorities and state-owned enterprises dries up. Reforms limiting the official use of cars encourage government officials and executives to take taxis for conducting business. Such measures, which have taken effect in a number of cities, are reducing luxury car sales. The central government also is poised to lay off some employees, meaning fewer people will be eligible to use official cars.

Mr. Murtaugh, a veteran of GM Asia joint ventures, is undaunted by predictions of gloom and doom. "Nothing has changed that we didn't anticipate," he says. "The government is shrinking, and this will have a dramatic impact. The outlook isn't as rosy as a year ago. But we're not panicking."

"Our target group has not changed," Mr. Murtaugh says. "We're predicting two of every three Buicks sold will be to a JV, entrepreneur or private enterprise."

No prices yet have been announced, but insiders expect them to be near $35,000.

Shanghai Buick prototypes already have passed muster with GM officials in Detroit, where they were tested earlier this year. A GM insider tells WAW the cars "attained a level better than expected." The question now is whether sales will do the same.