Cadillac Mulls Sales, Production in China

SEOUL, South Korea — General Motors Corp. plans to begin sales of Cadillac vehicles in China in 2004, with possible assembly of its luxury division's products in the emerging market, according to company executives.

“We believe now with Cadillac coming out with very effective products, and with the growth of the luxury market in China during the last three years, we think there is great potential for Cadillac in China,” says GM China Chairman and CEO Phil Murtaugh.

“We will launch it early next year. We are evaluating the entire portfolio of Cadillac products. However, we have not yet finalized the specific lineup that we will bring here or the timing of introduction of each specific model. That's still under discussion.”

GM has four joint ventures in China, and the auto maker says it would like to assemble the Cadillacs in the country rather than import them from the U.S.

“The plan is to sell Cadillacs in China next year,” says Murtaugh. “We don't know quite yet how we're going to do that. There are lots of hurdles we have to jump over and we don't have our final plans figured out yet. To be honest, the option of manufacturing here is a very attractive option. But I'm not trying to be evasive. It is a potential we'd like to do. We just don't know yet how we can quite do that.”

As to whether Cadillac manufacturing could begin in 2004 in China, Murtaugh responds: “It depends on what kind of manufacturing you want to do.”

Cadillac's CTS and Seville sedans appear to be the most likely candidates for sale in China. While Cadillac's fullsize line of Escalade SUVs might appear to be an attractive option for the world's most populous country, most Chinese view the large trucks as work vehicles for peasants.

Furthermore, the luxury-car segment in China is dominating the market. According to Mike Dunne, founder of the research firm Automotive Resources Asia Ltd., three of the top five selling cars in China are priced at more than $28,000.

GM's four joint venture plants are located in Shanghai, Shenyang, Liuzhou and Yantai. The Shanghai facility seems the best fit for Cadillac production. It currently makes four Buick products. However, it's already working around the clock using a 3-shift operation to meet demand. Adding capacity is possible, and plant management is eager.

“We would definitely be interested in producing Cadillacs. We'd have to invest accordingly to do that,” says Shanghai GM Executive Vice President Chris Gubbey.

Chen Hong, vice president of Shanghai Automotive Industry Corp, the China-based partner in the Shanghai plant, echoes Gubbey's outlook. “We hope to expand the scope of our cooperation between GM and SAIC.”

The China Daily newspaper reported in July that GM would spend $240 million to increase production in Shanghai. But Gubbey wouldn't confirm those plans. “We haven't made any further announcement regarding our operations in Shanghai,” he says.

GM also wouldn't disclose projected volumes for Cadillac in China.