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Formosa Auto may team up with GM to tap into China

Formosa Automobile Corp (台塑汽車) may team up with US-based General Motors Corp to tap into the growing mainland Chinese market and to further bolster their business in Taiwan, sources told the Taipei Times yesterday.

"The two [GM and Formosa Automobile] have been in talks for a long time to produce Buick cars in Taiwan," said an industry veteran on condition of anonymity. "GM is also interested in taking a majority stake in Formosa Automobile Sales Corp (台宇汽車) to strengthen its distribution and marketing network here," the industry official added.

Formosa Automobile and Formosa Automobile Sales are all subsidiaries that belong to Formosa Plastics Group (台塑集團), the nation's largest industrial group.

Local Chinese-language media have recently reported that GM wants to standardize its car parts and ask its Shanghai factory and Formosa Automobile's Tatu factory in Taichung to develop components that complement one another, lowering the development costs of new cars.

But Tseng Sheng-cheng (曾盛誠), executive vice president of Formosa Automobile, dismissed speculation that his company is in talks with the world's largest automaker about the production of Buick cars here. "They [GM] have not formally approached us for talks on producing Buick [brand] vehicles," Tseng said.

He also wouldn't comment on the possibility of GM investing in Formosa Automobile Sales.

Formosa Automobile is currently discussing plans with South Korea's Daewoo Motor Co to launch its third car model later this year in Taiwan, following the launch of 2.0-liter Magnus sedans at the end of 2000 and 1.3-liter Matiz compacts in January, according to Tseng.

Interestingly, Daewoo -- a technological partner of Formosa Automobile when the latter was founded in 1998 -- has preliminarily agreed in April to sell 67 percent of its assets to GM.

General Motors Taiwan Ltd (台灣通用), a wholly owned subsidiary of GM, however, said they have not ruled out the possibility of reaching a manufacturing partnership with Formosa Automobile to cooperate in producing Buick cars for sale in China and Southeast Asia.

"It is one of the options we have on this Asia Pacific market, especially after we formally take over the debt-laden South Korean car maker," said Chen Wei-shu (陳威旭), sales and marketing director of GM Taiwan.

One analyst was upbeat on the proposed partnership between GM and Formosa, saying GM would not only replace Daewoo to provide Formosa Automobile with the needed technical know-how, but also offer the strong brand name that Formosa Automobile needs to survive in the local car market.

"It will be a good match because GM represents a strong brand worldwide while Formosa Automobile is known for its cost-efficient manufacturing," said Yang Ching-hwa (楊晴華), an auto industry analyst at KGI Securities Co (中信證券).

"But how much Formosa Automobile, which already manufactures some auto parts for Daewoo, will gain from the proposed partnership will depend on how big orders for auto parts are -- and on how strong a product line-up GM is willing to offer," Yang said.

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