GM and Isuzu Motors deal to rev SA economy
GENERAL Motors’ (GM) vehicle manufacturing operations in South Africa are poised to get a significant boost, securing GM’s presence in the country and resulting in further capital investment and the creation of many new job opportunities.
This follows the signing of a framework agreement between GM and Isuzu Motors, which further strengthens the relationship between the two vehicle manufacturers.
In a statement issued on Friday, GM and Isuzu Motors confirmed the signing of the framework agreement and that it was focused on increasing cooperation and the level of involvement of Isuzu in GM’s operations in South Africa.
“The main objective of this agreement is to ensure that the South African manufacturing operation is well positioned to assemble light commercial vehicles at high volume for both domestic and export markets while continuing to provide a strong portfolio of Chevrolet, Opel and Isuzu vehicles to its customers.
“This agreement serves as confirmation of GM’s commitment to the long-term future of its operations in South Africa. More details will be communicated once discussions have been completed over the next year,” it said.
Ian Nicholls, the vice-president of GM South Africa Operations, said on Friday that the agreement was the culmination of a lot of hard work by GM employees in South Africa and globally, and also signalled the start of more work to finalise a detailed agreement during the balance of this year and into next year.
The agreement
Nicholls told Business Report that the agreement would not have an impact in the short term on GM’s manufacturing operations in South Africa, but would set it up for the next cycle of production.
“It will have a long-term impact on our manufacturing activities in South Africa, which will be positive for employment. There will be the direct employment benefits in the operations of GMSA and the indirect benefit of high volume production and increased localisation, which will have a positive impact on GMSA’s supplier base.
“I can’t quantify the impact (at this stage), but it will be big,” he said.
The increased production of Isuzu vehicles by GMSA is also likely to lead to increased capital investment in its plant in Port Elizabeth, but will probably coincide with the launch of a new Isuzu light commercial vehicle (LCV) model.
The Isuzu LCV models produced by GMSA are about two to three years into their lifecycle. The normal lifecycle of a model is about seven years.
Nichols added that Isuzu was an important partner for GM in Africa through its manufacturing operations based in South Africa, Kenya and Egypt, and also its distribution across the continent.
He said the agreement also built on the existing co-operation and partnership between Isuzu and GM in South Africa, which had been in place for almost a decade through its joint venture that focused on building and distributing medium and heavy commercial trucks.
A key brand
Nichols stressed that Isuzu was a key brand for GM in South Africa after being offered in the market for almost four decades and commanding a 14 percent share of the 1 ton segment of the market and a 15 percent share of the medium and heavy commercial truck market.
GMSA has been under pressure to achieve the minimum annual production threshold of 50 000 units in the Automotive Production and Development Programme (APDP), which qualifies locally based motor manufacturers for certain incentives and benefits.
Tanya van Meelis, the chief economist at the Economic Development Department, confirmed last month that both GMSA and Nissan South Africa had been granted temporary exemptions from the APDP’s minimum annual production threshold.
Denise van Huyssteen, the communications manager at GM Africa, told Business Report at the time that a longer term manufacturing footprint was currently under development for GMSA, but it was premature to speculate about which products would form part of its future manufacturing portfolio.
“Our objective remains to grow our locally assembled vehicle production for both the domestic and export markets,” she said. “As we enter the next phase of capital investment, we will be looking to undertake further upgrades to our manufacturing operations and investment in next generation programmes.” Tariffs on semiconductors, magnetic resonance imaging machines, global positioning system devices, printer ink cartridges, video game consoles and other products would be cut to zero under the deal, according to the USTR office.
The expanded product list will now undergo consideration from trade ministers at their various capitals. “We have the basis for an understanding,” Azevedo said after the meeting.
“The list is out, members are going to consult their capitals, and we will know by Friday whether we have final approval on the list of products and the declaration itself.”
The product list could pave the way for a finalised deal that would contribute as much as $190 billion to the global gross domestic product and support 60 000 US jobs.
Technology manufacturers like Intel, Samsung Electronics, Sandisk and Texas Instruments stand to benefit from the elimination of tariffs on some 250 products.
The 80 WTO countries that participate in the ITA talks account for about 97 percent of global trade in IT products.
The ITA requires participants to eliminate import tariffs on technology products on a most-favoured-nation basis, meaning that any duty-free terms are applied to all WTO members.
In September, ITA negotiators are to start talks on schedules of concessions for tariff reductions, also known as staging. That allows countries to gradually phase in the tariff reductions for certain products deemed too sensitive for the ITA’s various signatories. – Bloomberg