GM to shut plant, cut jobs in Indonesia, where Japanese dominate

Thu Feb 26, 2015 10:50am EST
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By Norihiko Shirouzu

BEIJING (Reuters) - General Motors (GM.N: Quote) will stop making GM-branded cars in Indonesia, a battleground for global automakers, closing an assembly plant, axing some 500 jobs and shifting its focus to sport utility vehicles (SUVs).

The U.S. auto giant, which was the first to set up a car assembly plant in Southeast Asia's biggest economy eight decades ago, is effectively calling time on its attempt to wrestle market share from dominant Japanese rivals, led by Toyota Motor (7203.T: Quote).

GM Executive Vice President Stefan Jacoby, who oversees markets beyond the Americas, Europe and China, acknowledged GM got it wrong in going head-to-head with the Japanese in a market he dubs their "backyard".

The move is part of a broader repositioning of the Chevrolet brand across Southeast Asia, emphasizing its American heritage for SUVs such as the Captiva and Trailblazer. The retreat also comes as GM drives into Indonesia with its Chinese partner, SAIC Motor Corp (600104.SS: Quote).

The partners plan to set up a manufacturing facility near Jakarta for their no-frills Wuling brand, but aren't interested in taking over GM's existing Bekasi plant, a person close to the joint venture said.

GM tried to take on Japanese rivals by locally producing its Chevrolet Spin, a strategic, small "people mover" van that has proved a winner in Brazil. But the Spin was too costly to make to be profitable in Indonesia as most of the parts had to be imported.

The Spin sold from around $12,000 and competed with Toyota's Avanza. But it failed to take off as GM had hoped, making the production plant at Bekasi, just outside Jakarta, a financial burden. Production last year was less than a quarter of Bekasi's annual capacity of 40,000 vehicles. GM sold just 8,412 Spin cars in Indonesia last year, and exported nearly 3,000.

"We could not ramp up Spin production to boost the volume as we had expected ... although the product was really good," Jacoby told Reuters. "The logistics chain of the Spin was too complex; we had low volume so we could not localize the car accordingly, and from the cost point of view we were just not competitive."   Continued...

Workers walk next to new Chevrolet Spin MPVs during the official launch of the General Motors plant in Bekasi, on the outskirts of Jakarta in this February 19, 2013 file photo.    REUTERS/Enny Nuraheni/Files