GM Focuses on Brazil - Analyst Blog

General Motors (GM) has revealed its plan to invest R$1.4 billion ($770 million) to modernize and expand the Sao Caetano do Sul and Mogi das Cruzes plants in the Sao Paulo state of Brazil . The expansion, which includes two new models that will be produced for the Brazilian and the international markets, will refresh the Chevrolet production line.

In fact, GM is pursuing a plan from 2008 that will increase production capacity and refresh its Chevrolet models in Brazil . The plan entails an investment of R$5 billion ($2.75 billion) and would run until 2012.

Last year, Ford Motor Co. (F) said that it will invest R$4 billion ($2.2 billion) in order to benefit from government tax incentives and lower interest rates in Brazil that are fueling record sales. Ford has decided to spend R$2.8 billion ($1.5 billion) at the Camacari plant – a state-of-the-art plant in the northeastern state of Bahia – with the aim of increasing output by 20% to 300,000 vehicles a year. The remaining R$1.2 billion ($660 million) will be invested at Ford's factories in Sao Paulo including its Sao Bernardo plant and a testing facility in Tatui.

So far, car sales in Brazil have been significantly helped by government tax incentives that lowered car prices and lured consumers to showrooms. But the tax breaks are scheduled to expire by the end of the year. However, the investment will allow Ford to achieve state and federal tax breaks from the Brazilian government until 2015.

Brazil is a potential market for U.S automakers including Ford and General Motors, and European automakers including Italy's Fiat SpA and Germany 's Volkswagen AG. In 2009, the nation’s auto sales soared 51.1% to 3.01 million units. According to the Brazilian automobile dealers' association, automobile sales in the country are expected to grow by 9% in 2010.
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