GM invests $2.7B in Brazilian plants to supply South American market

Nora Naughton
The Detroit News
The Chevrolet Onix Joy is among the vehicles built at the Sao Caetano Du Sul  plant in Brazil.

General Motors Co. is investing 10 billion reais ($2.65 billion) in two Brazilian plants amid a restructuring in the South American market.

The investment in the Sao Caetano Do Sul and Sao Jose Dos Campos plants — which build Chevrolet cars, crossovers and SUVs for the South American market — makes way for an undetermined number of new products at the plants, GM spokesman Dan Flores said.

The investments in GM's South American operations come as the automaker is moving to indefinitely idle four U.S. plants and one in Oshawa, Ontario. The first plant to stop production was Lordstown Assembly in northeast Ohio earlier this month, which drew the Twitter ire of President Donald Trump over the weekend. The plant actions are part of a larger restructuring designed to save cash and divert capital toward expensive electrification, autonomy and mobility endeavors.

The investment in the two Brazilian plants, which employ 15,000 workers, does not impact GM's U.S. operations, Flores said. The new products built at the plants, for which GM would not provide specifics, would not be imported to the U.S. market, muting a potential flashpoint in national contract talks later this year with the United Auto Workers. 

GM is getting ready to introduce an all-new portfolio of vehicles, first for China in 2019 and then for South America and Mexico, the Detroit automaker said at its annual financial forecast earlier this year. Meantime, GM continues to invest in other union-represented U.S. plants, including a $36 million investment at Lansing Delta Assembly and $20 million at its Romulus propulsion plant.

At the January investor event, GM CEO Mary Barra hinted at a possible exit of the South American market if existing market challenges — including foreign-exchange headwinds in Brazil and Argentina — could not be addressed, adding: "We are not going to keep deploying capital to lose money."

The automaker has been working with the Brazilian government, dealers, suppliers and labor unions "to create a business plan that’s going to weather these economic circumstances better," GM CFO Dhivya Suryadevara said after the automaker reported its 2018 earnings.

GM said Tuesday its investment in the two Brazilian plants reaffirms the company's commitment to the region.

"We will continue to work with all stakeholders, including the government, to address the competitive issues affecting GM business and the automotive industry in Brazil, such as material, labor and logistics costs, infra-structure, taxes and high cost of capital," Flores said in an emailed statement. "We need to face these issues to build a competitive manufacturing basis in Brazil and the region, to be able to have a sustainable business."

In the past several years, the Detroit automaker sold its European operations, restructured its business in South Korea, and ended production in Russia, Australia, Indonesia and South Africa.

Twitter: @NoraNaughton