South Africa’s Delta Motors has confirmed that US auto giant General Motors is to acquire a majority shareholding in the company. Negotiations for the takeover of Delta commenced in September 2001, but were temporarily suspended due to the economic uncertainty following the September 11 terrorist attacks. The value of the transaction is as yet unknown, but it is expected to be a significant amount.
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Delta was formed in 1986 in a management buyout after GM left South Africa in protest against the apartheid regime. In 1997, GM returned to South Africa and acquired a 49% stake in the company. Delta employs more than 4,000 people and assembles GM’s Opel branded Corsa and Astra cars and Isuzu light trucks.
GM aims to manufacture vehicles in South Africa largely for export purposes. The company intends to integrate Delta’s Port Elizabeth manufacturing facilities into its global supply chain once Delta becomes a full subsidiary of the US group.
In recent years, South Africa has become an export base for car manufacturers thanks to an abundance of natural resources and strategic location to support other right hand drive countries. The numbers of cars exported have risen sharply over the past few years. In 1995, car exports were about 9,000 units, rising to about 115,500 units in 2003.
The acquisition will give GM full access to Delta’s cash flow, which might be converted into dividends to be sent abroad. GM has just revealed a fall in profits at its core car manufacturing division, recording earnings of £218 million in the last three months of 2003, down by 24% on the same period in 2002. However, the group expects to increase its global industry sales by more than 3% in the coming year, which equates to around 60 million vehicles. This may partly be achieved by improved productivity, but the company must also continue to upgrade its vehicle range, without compromising product quality.
