MercoPress. South Atlantic News Agency

GM Brazil to invest a billion US dollars in two new models for Mercosur

Contrary to the US GM in Brazil is a success story with annual sales of 550.000 units.

General Motors announced Wednesday it will invest a billion US dollars to develop two new car models in Brazil. GM Brazil and Mercosur operations president said it was the corporation’s biggest investment since the onset of the global financial crisis.

Jaime Ardila says about 50% of the money will come directly from GM Brazil while the rest will be borrowed. The bulk of the investment will go for the production of a new small car and one medium-sized to be developed at the Gravatai plant in southern Brazil and are expected to be in production by 2012.

“We'll begin development of the models now and the production will begin in 2012,“ Ardila said. ”We'll have other models of the same family that we'll announce in the future“.

Speaking after meeting with Brazil's President Lula da Silva, GM CEO said the cars would be sold in Brazil and other Mercosur countries, and GM Brazil might later export them to other nations, such as South Africa.

The news of expansion in Latin America's biggest economy comes as GM is emerging from bankruptcy protection in the United States as a private company majority owned by the US government. The GM Brazil unit is financially independent from that in the US and has nothing to do with the restructuring there, Ardila said.

“GM Brazil has avoided the problems of its parent unit in the US because of strong demand in Latinamerica”, said Ardila. GM sold 580.000 vehicles in Brazil in 2008. He added that the new vehicles are based on Brazilian engineering and design, ”thus there is also no dependence on products” from the US.

The investment, 50% from GM Brazil and the rest from Brazilian government banks would be the biggest GM has ever made in the country, where it has operated since 1925.

Ardila underlined that it is GM's first major investment anywhere since the global financial crisis took hold last year.

Brazil's government has aided the auto industry sales by slicing sales taxes and relaxing lending terms. The continued cutting of Brazil's key interest rate has also freed up commercial lending, giving more consumers the access to cash to buy big-ticket items like cars.