Detroit Free Press
DETROIT – Even as General Motors Corp. closes plants in the United States, the automaker plans to break ground on a new car-assembly plant in Mexico, where sales are strengthening and GM is the market-share leader.
The GM plant, in the central Mexican state of San Luis Potosi, will employ 1,800 to 2,300 workers, GM spokesman Carlos Gelista said Thursday.
GM will invest $600 million to $650 million in the plant and the tooling to build vehicles. The Mexican government has contributed incentives to help fund the construction, Gelista said.
Construction will begin in late May or early June, and compact and subcompact vehicles will begin rolling off the assembly line in 2008. GM has no plans to export any of the cars to the United States, Gelista said. He did not identify which vehicles would be built there.
“We are looking to try to export some of the production of that plant to Central America and South America,” he said.
Even with gasoline prices averaging $2.50 a gallon, there’s little demand in the United States for such subcompact cars as the Chevrolet Aveo, said Catherine Madden, a senior analyst with Global Insight.
Gas prices would have to rise to $4 a gallon and remain there for a year to spur demand for subcompacts, Madden said.
“There’s not a lot of indication that Gen Y is going to jump into the subcompact segment,” Madden said.
GM sold 68,000 Chevrolet Aveos in the United States last year. Demand is much stronger for compact and subcompacts in Mexico and South America.
GM told Mexican media about the plant a week ago but didn’t release information to the U.S. media.
GM may have kept news of the plant quiet in order not to upset the United Auto Workers union, said Guido Vildozo, director of South American and Central American forecasting with Global Insight.
“It’s managed to fly under the radar screen,” he said. “I guess they’re awfully cautious to make sure that nobody in the UAW feels hurt by this decision. That’s the reason they’ve kept a low profile on the news release.”
GM already imports several of its top-selling vehicles, including the Chevrolet HHR small car and Buick Rendezvous SUV, from Mexico. GM also builds the Chevrolet Silverado pickup and the Chevrolet Suburban and GMC Yukon XL large SUVs in Mexico as well as the United States.
The new plant would probably build around 50,000 cars annually, Vildozo said.