June 28, 2018 / 7:15 AM / 3 months ago

GM to transfer Vietnam operation to Vingroup's car arm, eyes sales boost

HANOI (Reuters) - General Motors (GM.N) has agreed to transfer its Vietnamese operation to VinFast Trading and Production LLC and distribute Chevrolet cars through the local carmaker, in a move that could help drive up its modest sales in the country.

FILE PHOTO - The GM logo is seen at the General Motors headquarters in Sao Caetano do Sul, Brazil March 13, 2018. REUTERS/Leonardo Benassatto

The U.S. automaker will transfer full ownership of its Hanoi factory to VinFast for the Vietnamese firm to produce small cars under a GM global license from 2019, the companies said in a statement on Thursday, without disclosing a value for the deal.

As part of the deal, VinFast, a unit of Vietnam’s biggest private conglomerate - Vingroup JSC VIC.HM, will be the exclusive distributor of the Chevrolet in Vietnam.

“The GM-VinFast strategic partnership will best position the Chevrolet brand and dealer network for long-term growth in Vietnam by leveraging GM’s global scale and expertise, married with VinFast’s domestic strength and insight,” said Barry Engle, executive vice president and president of GM International.

The transfer, which includes GM’s Hanoi plant, dealer network and employee base, is expected to be conducted by the end of 2018, the companies said in the statement.

GM used its Hanoi plant to assemble Chevrolets with parts imported from South Korea - a country where the U.S. automaker came close to bankruptcy as it struggled to turn around its debt-laden unit. GM Korea is GM’s biggest production base in Asia excluding China.

The plant will be used solely to produce VinFast cars after the transfer, while Chevrolet cars will be imported.

VinFast said this partnership with GM was “integral” to its plan to “launch a portfolio of five VinFast vehicles in 2019”.

It is building a $1.5 billion factory in the northern province of Hai Phong and plans to launch a sedan and sport-utility vehicle in the third quarter of 2019, and a small car, electric car and electric bus by end-2019.

“Our vision is to build an automobile manufacturing eco-system that will include assembly plants, local automotive suppliers and dealers, and a string of supporting industries,” said VinFast CEO Jim DeLuca.

Vietnam’s automobile sales grew 24 percent in 2016 but fell 10 percent last year to 272,750 units, data from the Vietnam Automobile Manufacturers’ Association (VAMA) showed. Sales fell 6 percent in the first five months of 2018.

While GM’s sales in Vietnam have been rising since 2014, its numbers last year were only an eighth of the country’s market leader, local Truong Hai Auto Corp, and a sixth of runner up Japanese rival Toyota Motor Corp (7203.T), VAMA data showed.

Sales of the Chevrolet, the only vehicle GM offers in Vietnam, grew 8.5 percent to 10,576 units in 2017, lagging gains of 34.5 percent in Indonesia and 25.7 percent in Thailand.

Reporting by Mai Nguyen, Editing by Christopher Cushing and Himani Sarkar

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