BEIJING, JAN. 21 -- General Motors Corp. signed agreements today to sell China $20 million worth of equipment and technology to manufacture a GM automobile engine.
Barton Brown, president of General Motors Overseas Corp., said that if all goes according to plan, GM will participate at a later stage in the joint production of motor vehicles in China.
Brown said today's agreements marked the first step in a long-term, multifaceted plan to assist in the modernization of China's automotive industry.
That industry has been irrationally dispersed and riddled with inefficiencies ever since the late chairman Mao Tse-tung decided to separate some factories and move them inland in order to make them safe from a Soviet nuclear attack.
According to Brown, phase I of the new plan is expected to include a joint venture for a modern foundry to support the GM engine program and additional projects to manufacture axles, starter motors, distributors and alternators.
Phase II is to include additional manufacturing ventures leading to the production of motor vehicles for the Chinese market, Brown said at a press conference here today.
General Motors' subsidiaries, such as one that signed an agreement with the Chinese for heavy-duty transmission manufacture three years ago, have done business in China before. But today's agreement signaled a much larger commitment by GM.
Brown said that "if fully implemented, it will reflect the broadest involvement in China's auto industry of any foreign corporation."
According to the official New China News Agency (NCNA), China has been trying to break its dependence on imported automobiles because of their high cost and the fact that imports still do not meet increasing demands.
NCNA said China spent nearly $1 billion in precious foreign exchange on 100,000 imported cars in the first half of the 1980s.
But the agency said China still had only 270,000 cars as of mid-1987.
It quoted an auto industry expert as saying that the country will need 4 million cars and jeeps by the end of this century.
China formed its first automobile joint venture with American Motors Corp. in 1983 to produce Cherokee jeeps.
But the venture encountered serious foreign-exchange problems and had to shut down temporarily in 1986 before resuming normal production.
A Sino-German joint venture in Shanghai that produces cars with Volkswagen technology has had to import most of its parts from overseas, creating a chronic need for foreign exchange expenditures.
At today's press conference, Chen Zutao, chairman of the China National Automotive Industry Corp., indicated that China hopes to use the GM deal to help break its dependency on imported cars and parts.
Chen said China will produce its own automobile parts in cooperation with General Motors and then export them through GM dealers overseas, thus earning foreign exchange.
Brown said the initial installation of the GM engine line at the Bei Nei factory in Beijing will produce 150,000 engines a year but that with Chinese workers on two shifts the number could be doubled to 300,000.
China currently produces about 450,000 motor vehicles a year, but most of them are trucks.
The 2 liter GM engine will be installed in non-GM vehicles being built in China. Production of the engine is expected to begin in late 1990.