GM Daewoo Auto & Technology president Nick Reilly has strongly protested against South Korean moves on emission standards and tax reductions that he claimed strongly favoured South Korea’s dominant Hyundai Automotive Group, the New York Times reported.
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According to the paper, Reilly said the government had favoured Hyundai Motor and affiliate Kia Motors by setting relatively easy emission standards for diesel engines two years from now before raising the standards beginning in 2006.
“Seoul is one of the worst cities in the world as far as fuel quality is concerned,” Reilly reportedly said, professing not to understand why the government for the year 2005 had set Euro Three emissions standards, limiting a diesel engine to an emission level of one twentieth of one gram of particulate matter per kilometre [about two-thirds of a mile], rather than wait until 2006 when Euro Four standards of half that much emission will apply.
According to the New York Times, the director of the pollution control division of South Korea’s environment ministry, Park Chu Gyu, countered that the European Union had set the same schedule of standards for all cars in Europe. “We could not conclude in favour of one company,” Park reportedly said, defending the government’s decision.
“We think it is a bad decision and favours one company in particular,” Reilly told the New York Times at the company’s headquarters. GM Daewoo would not be able to compete in diesel vehicles at all in 2005 and would have to wait until 2006 when he said the company would have “very competitive Euro Four engines,” the paper added.
The New York Times said the debate over the emissions standards reflects the view that the Hyundai Automotive Group, which controls three-quarters of South Korea’s motor vehicle market, moved into an unassailable position in the years in which Daewoo Motor was floundering after the collapse of the Daewoo Group in mid-1999.
The report added that many observers have questioned whether GM Daewoo, despite an infusion of components and technology from the United States, can regain the position that it once commanded as Korea’s second-ranked motor vehicle manufacturer behind Hyundai and ahead of Kia.
The newspaper said that GM Daewoo, now deep into third place, with 10.6% of sales at the end of March and 9.5% last year, is struggling to make a comeback with the promise of greatly expanded exports.
GM Daewoo in the first quarter of this year sold 38,083 vehicles in Korea and exported another 40,405 while Hyundai in the same period sold 180,785 vehicles at home and exported 223,972 and Kia sold 85,717 vehicles domestically and exported 117,401 vehicles, the New York Times noted.
Reilly, summarizing to the NYT the company’s progress since its inception six months ago from the wreckage of the bankrupt Daewoo Motor Company, predicted that exports would double next year, with GM exporting versions of three of its cars to the United States, two through its Japanese affiliate, Suzuki Motor, and one through Chevrolet. At the same time, General Motors China and two of its joint ventures have introduced three vehicles that are versions of GM Daewoo vehicles made in South Korea.
According to the New York Times, Reilly was dismayed, however, by the fate of the company’s plan for a new version of its 800cc Matiz minicar. Those buying 800cc cars now get a significant tax reduction that the government is preparing to grant to buyers of cars with engines as large as 1,000cc. The result, GM Daewoo told the NYT, will be to favour Hyundai, which produces no vehicle below 1,000cc.
Reilly told the New York Times that his company had had to postpone a plan to build a new model of its 800cc Matiz while awaiting the final government decision.
“We do not understand why you need to change the mini segment at all,” he reportedly said. “Given the state of our investment in the replacement Matiz, our request to the government is not to change anything for five years.”
But, the New York Times noted, Hyundai and Kia officials were not sympathetic.
“They have their own business objectives, and we have ours,” Kia spokesman Steve Bowen told the paper. “They are trying to put pressure on the government, and they’re using every cannon in their arsenal.”
