Yulon and GM form partnership

Yulon Motor Co (裕隆汽車), the nation's second largest carmaker, yesterday inked a final agreement with General Motors Corp (GM), the world's largest automaker, to form a partnership to distribute and assemble GM's vehicles in Taiwan.

The two parties will invest NT$2 billion in the joint venture, called Yulon GM. Yulon will have a 51 percent stake in the company, with GM holding the remaining 49 percent.

Yulon will control the appointment of chairman and president, while GM will assign their deputies. The venture which is slated to be set up in the second quarter of this year.

Yulon will have four seats on the company's board, with the remaining three seats taken by GM. The two parties will assign one seat each of the two seats set aside for supervisors.

The two firms yesterday, however, declined to disclose the arrangement of management personnel until after the venture's formal establishment.

market share

"We have been a smaller player over the past few years than we would have liked," Philip Murtaugh, chairman and chief executive officer of GM China, said at the contract-signing ceremony in Taipei yesterday. "To become a leader here in Taiwan, we needed a partner."

Yulon, which has become a top manufacturer and distributors of vehicles as well as a leader in sales and marketing of products in the market, is an ideal partner to strengthen GM's market power here in Taiwan, Murtaugh said.

The venture is expected to become one of the nation's top five players in the next three to five years, said Yulon's president Chen Kuo-rong (陳國榮), who reportedly could take the helm of the new firm.

The new joint venture will start distributing imported Opels, Cadillacs and Buicks in the second quarter and allow Yulon to manufacture Buick sedans and recreational vehicles in the future.

production of Buicks

Yulon will begin production of Buick cars as soon as it can meet the requirements for a domestic car, which require a minimum 40 percent of components to be locally made, Chen said without elaborating on the expected timeframe.

Describing the partnership as a win-win deal, Chen said the need for economies of scale had forced players to seek cooperative partners to lower costs and speed up time to market.

"Only those who can fully utilize capacity have a competitive edge," he said.

The deal is expected to help Yulon -- which has an output capacity of around 150,000 units annually -- to enhance its utilization rate, which is currently around 60 percent or 70 percent.

Murtaugh, who has been lobbying the government to lift a ban on importing vehicles from China in the last three years, said there is a possibility the new venture could export cars back to China in the future.

Unlike Taiwan, China does not have restrictions in this area and it would be economically efficient to ship a small volume of cars from Taiwan instead of putting further investment there, he said.

In addition to China, Yulon GM will also target India and Southeast Asian countries, according to Kenneth Yen (嚴凱泰), Yulon's vice chairman.