Business

Friday September 25, 2009

DRB-HICOM pitches for CKD ops with GM

By JAGDEV SINGH SIDHU


KUALA LUMPUR: As the deadline approaches for a decision on the business relationship between General Motors Corp (GM) and DRB-HICOM Bhd, the Malaysian minority partner has made a pitch to GM about jointly conducting completely-knocked-down (CKD) operations in the country.

Market sources said the prospects of doing local assembly for GM would be beneficial to future sales as locally assembled cars would be cheaper.

GM is conducting a review of its operations and business in Malaysia and in the centre of talks is the business relationship with DRB-HICOM via HICOM-Chevrolet Sdn Bhd.

One report indicated a decision might have been made with current Chevy 3S dealer Cergazam Sdn Bhd, a company owned by timber company Permaju Industries Bhd, with Cergazam taking over distribution operations until a full-time partner could be found.

The seeming breakdown in the relationship between GM and DRB-HICOM is somewhat puzzling as the latter has had a long and fruitful relationship with other vehicle manufacturers in the country, a market observer said.

From having total control, DRB-HICOM now has a minority stake in the Suzuki business in the country and business is said to be good.

In Mitsubishi, the company has a 48% stake and is looking hard at doing some CKD operations here.

The Isuzu operations too have seen DRB-HICOM taking a minority stake after running the show in the past.

After restructuring operations in Pekan, the joint-venture company with Isuzu is said to be flourishing and profitable.

DRB-HICOM is also assembling Mercedes-Benz cars at its plant in Pekan, which the company sees as an endorsement of its capabilities.

“There are many others who are knocking on DRB-HICOM’s doors wanting to explore the possibility of doing assembly in Pekan,’’ a source said.

Its most successful joint venture is with Honda, where DRB-HICOM has a 34% stake.

With the Chevy business in Malaysia, DRB-HICOM started distributing and selling GM cars in 2003 and was selling about 6,000 cars a year with more than 30 dealers under its wing.

The number of dealers shrank over time given GM’s preference for its dealers to have 3S (sales, service and spares) capability.

There are now about eight dealers in the country, the largest of which is Cergazam.

Apart from being impacted by the national automotive policy (NAP), sales have also not been helped by a sparse lineup of new models.

GM has sold just under 1,000 cars since taking over management control of HICOM-Chevrolet in 2007 and market observers said the Chevy Cruze would be the only big name new car slotted for sale next year.

DRB-HICOM is willing to invest millions of ringgit in the GM business in the country but it wants a larger say on how operations are run, according to sources.

“The company needs changes so that sales can improve in the future,’’ one source said.


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