Shanghai Makes Room for a Minivan

SHANGHAI - Shanghai General Motors Co. Ltd. (SGM) in September took a great leap past what it considers a major milestone: the 10,000-unit mark.

By now, some 12,000 Shanghai Buick sedans have rolled off the line at the General Motors Corp./Shanghai Automotive Industry Corp. joint venture, to fill the 18,000 sales orders received since production began in April.

The plant will build some 20,000 vehicles this year; there is at least a two-month wait on delivery of the three models of Shanghai Buick.

Company officials say they are delighted - and frankly shocked - with the way things are going in China: "It's one of those rare projects that's on time, under budget, beating quality levels and beating its financial targets," says G. Richard Wagoner Jr., GM president and chief operating officer.

But while SGM is celebrating its success in the luxury car segment, it also is working to create an entirely new vehicle niche in China. In May 2000 SGM will introduce to the China market the tried-and-true, all-American, front-drive minivan.

"There is no market for it right now," says Jay Hunt, director of marketing and distribution for GM China Inc. "It is an undeveloped segment."

The fact that the minivan is uncharted territory in China should have no bearing on the success of the product, which is expected to make up about half of SGM's total sales, Mr. Hunt says. "There's a big mismatch between what's available and what people want," he says.

The vehicle, originally called the W-Wagon, will bow to the market as a Buick GL 7/8, depending on its seating configuration. Its exterior most closely resembles the Pontiac Montana, but will sport a Buick badge and grille and a slightly different back end.

There are signs that a change is in the works at the Shanghai GM assembly facility. As Buick sedans move through the plant's assembly lines, they pass by the body framework of several of these new minivans. In one corner of the plant sits a fully assembled Buick GL 7/8, complete with Buick badging.

Much of the setup for minivan assembly, which will take place on the same line as the Buick sedan, already is complete, says Tom Wilson, Shanghai GM assembly plant manager. "It was a challenge to do because it has more content compared to the car," he says.

Slow-builds currently are under way in the training center, while non-saleable builds started on the line in November.

The plant will add a second shift and an additional 1,000 employees, bringing its number of workers to 3,000, to accommodate production targets of 20,000 vehicles in the first year. This figure will bring the assembly plant one step closer to its 100,000-unit capacity.

Though based closely on the Pontiac version, the Chinese minivan shares its 2.98L V-6 engine with the Buick sedan, as well as its suspension, specially tooled for rough Chinese road conditions. It will come in two trim models.

Though Shanghai GM announced the new model at last June's Shanghai auto show, its development had been in the works since the JV's inception, Mr. Wilson says. The base agreement with the Chinese government called for a "W-car," which became the Buick sedan, and a "W-derivative." When the derivative was introduced to the government, SGM called it the "W-Wagon," and the moniker stuck throughout the product's development.

Though it loosely qualifies as a derivative of the Buick sedan and is built on the W-car platform, the Buick GL 7/8 targets a different market.

The minivan will have a more upscale image than its American and European counterparts and, despite its seating flexibility and size, will be used to haul people rather than cargo. Mr. Hunt says the company is positioning the vehicle as "a sedan with extra versatility."

SGM states the minivan's sales target breakdown: 10% government; 25% state-owned companies; 25% private companies; 20% joint ventures or foreign companies; 10% share-holding companies; and 10% individuals.

The Buick sedans are estimated to be 60% to 70% chauffeur-driven, a number expected to be lower for the minivan.

"This (vehicle) will appeal to the younger executive, someone a little less traditional than the W-sedan driver," Mr. Hunt says.

Pricing is not yet established, he says, but will be under $48,000 - "in the W-car range."

The minivan will be distributed through the same dealerships as the Buick sedans and will comply with the company's Saturn-like "no haggle," unified pricing system - a first for China.

Before the May launch, SGM is working on preparing China for this latest automotive segment. "We're priming the market to think about the vehicle as a new entry," Mr. Hunt says. "We're in the education phase."