General Motors has suspended construction of a US$450m diesel engine plant in Thailand as the company struggles to save cash in the face of a global demand slowdown.

The company this week is due to submit a business plan to the US Congress in a bid to raise US$12bn in government loans to help stave off bankruptcy.

A groundbreaking ceremony took place in August at a site near GM’s existing vehicle assembly facility in Rayong and was attended by group CEO Rick Wagoner. The plant was originally scheduled to be completed in 2009, with a production capacity of 100,000 2.5L and 2.8L engines per year and 340 employees. These new engines were to replace the current range currently sourced from Isuzu.

The delay is a further blow to the Thai automotive industry, which is reeling from declining domestic sales – made worse by the deepening political unrest in the country, and by falling export demand. The recent occupation of Bangkok’s airports couldn’t have come at a worse time – just ahead of the country’s peak tourism season.

Last week Toyota said it is reassessing its Thai investment plans as part of a broader global operational review and its planned small car facility, due to begin operations in 2012, could also be delayed.

Steve Carlisle, president of General Motors in South-East Asia, said “Hopefully we will restart construction in one year“. Most of the engines were to be fitted to its Thai-made Chevrolet Colorado pickup truck range. But demand for these vehicles has declined sharply in the last two months, forcing the automaker to announce lengthy production cutbacks in December and January in a bid to clear rising inventory.

Mr Carlisle told local reporters “the availability of cash is one of the problems facing GM globally and is one of the reasons we have put on hold work at the site“. GM is also said to be planning to delay new vehicle launches in Thailand next year.

Tony Pugliese