General Motors taking full ownership of CAMI car plant in Ontario
A worker attaches a harness to the empty body of a vehicle at CAMI Automotive facility in Ingersoll, Ont., in this 2006 file photo. General Motors Co. and Suzuki Motor Corp. announced an end to their 23-year automaking joint venture in Canada on Friday, with Suzuki selling GM its 50 per cent stake in the CAMI Automotive Inc. plant in southwestern Ontario. THE CANADIAN PRESS/Dave Chidley
TORONTO - General Motors Co. and Suzuki Motor Corp. announced an end to their 23-year automaking joint venture in Canada on Friday, with Suzuki selling GM its 50 per cent stake in the CAMI Automotive Inc. plant in southwestern Ontario.
The sale ends a relationship that began in the late 1980s when the partners built the CAMI plant located in Ingersoll, near London but automotive analysts say the move is strategic for both companies.
While Suzuki halted production of its XL7 models at CAMI in June due to lacklustre sales, GM assembles two of its top-selling vehicles at the Ingersoll plant, said Tony Faria, co-director of the automotive research centre at the University of Windsor.
"GM could use the capacity there now, Suzuki couldn't, so it was a good time, relatively inexpensively, for GM to nail in more capacity for themselves and assure the fact they'll have very adequate capacity for two good-selling (vehicles)."
The price tag of the deal, which gives GM full control of production of one of its hot-selling new vehicle lines, was not disclosed.
But Faria estimated the offer would be in the hundreds of millions, adding that GM was in a superior bargaining position because Suzuki vehicles have not been produced there for months.
"It's certainly good for Ontario, Ingersoll and the Canadian auto industry that GM, who just three, four years ago looked like they were the lame duck in the CAMI plant... that it's turned around" he said.
"With the Suzuki product being pulled out of CAMI, that could have spelled the end of the CAMI plant entirely, if GMs products were also on the skids but luckily it's the other way around."
CAMI, originally known as Canadian Automotive Manufacturing Inc., was established in 1986 and launched production in 1989. It has capacity to make 250,000 vehicles a year. The factory employs about 2,250 people, and has so far produced more than 2.3 million vehicles.
GM said Friday it had plans to expand capacity at CAMI to an additional 40,000 vehicles annually, adding to the current 200,000 it produces.
In November, GM announced a $90-million investment at the plant, and added a third production shift, which resulted in the recall of about 150 laid-off autoworkers.
The expansion will allow the car giant to run the plant at full capacity and meet strong demand for its 2010 Chevrolet Equinox and GMC Terrain vehicles, two crossover models that posted 17 per cent higher sales in November.
Faria speculated that after Friday's announcement, GM will likely add yet another shift at the CAMI plant, which could result in an additional 600 jobs.
"If we look at the period of time from a couple of months ago through to early 2010 there could be a doubling of jobs at the CAMI plant," he added.
Scotia Economics auto industry analyst Carlos Gomes said Friday the GM move comes as global car sales continue to pick up.
He said the crossover vehicle segment, including the CAMI-produced Equinox and Terrain, will continue to post the strongest gains, as people who want the practicality of an SUV with better fuel-efficiency abandon larger gas guzzlers.
Gomes said GM will have no problem taking over as the sole operator of the plant.
"The reality is that because the GM products that are produced (there) now are so popular, they're actually adding shifts to it, so I don't think that Suzuki leaving would have any impact."
The move leaves GM without a Japanese production partner after it ended its California car-making joint venture with Toyota Motor Corp., the world's No. 1 automaker, earlier this year.
GM is working to return to profitability under government-led restructuring and has staked its future on a series of new car models and its electric Volt vehicle.
"Bringing CAMI completely into the GM family is a strong vote of confidence in the people there and builds on the recent positive news at the plant since the highly successful launch of the Chevrolet Equinox and GMC Terrain," GM Canada president Arturo Elias said in a statement released early Friday.
GM Canada employs about 9,000 people at various plants in southern Ontario, including CAMI, an assembly plant in Oshawa, an engine plant in St. Catharines and the a transmission factory in Windsor that is slated for closure.
When General Motors (NYSE:GM) announced its restructuring plan after it filed for bankruptcy protection in the U.S. last spring, it said it would spend $2.2 billion on capital and $1 billion on research and development between now and 2016 in Canada.
The federal and Ontario governments invested a total of $10.5 billion in GM Canada earlier this year as the automaker struggled to survive the economic downturn. The U.S. government committed more than US$50 billion in aid to the company.
Suzuki spokesman Hideki Taguchi said GM approached the Japanese automaker with an offer to buy it out of CAMI.
The deal makes sense for Suzuki, he said.
Suzuki's market share in the U.S. is tiny. The automaker now exports vehicles sold in North American from Japan.
It sold just 1,540 vehicles in November. In contrast, Toyota sold 133,700 vehicles, and Honda Motor Co. sold 74,003 units.
GM first invested in Suzuki in 1981 and held as much as 20 per cent of the Japanese carmaker after doubling its stake in 2001. Suzuki completed a purchase of its own shares from GM last year. The venture has produced small cars and sport-utility vehicles since 1989.
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