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Detroit 3 look East beyond China

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Detroit 3 look East beyond China

Inroads sought in Asian region where 2M autos to be sold

Michael Dunn / Special to The Detroit News

When Detroit's carmakers hear the word Asia these days, their first thought turns to opportunities in China, then India.

But there is a third Asian growth jewel that deserves attention, too. It is ASEAN, the collection of 10 countries in southeast Asia with a combined population of 550 million people.

ASEAN stands for Association of Southeast Asian Nations, a political alliance formed in the 1960s as a bulwark against communism. Today, ASEAN is a loose economic group that includes all countries in the region, even the communist ones like Vietnam. Its central, if undeclared, purpose is to join hands to fend off the mounting economic threats from China and India.

Consumers in ASEAN will buy 2 million cars and trucks, this year, making the market about the same size as the United Kingdom. That number is expected to climb to 2.6 million in 2015, according the forecasts by J.D. Power and Associates. So, there are growth and profits to pursue.

But for American companies, winning consumers in ASEAN has been tough. GM, Ford and Chrysler will sell just 55,000 cars in the region in 2010, or about 3 percent of the total market. Ford builds the Ranger pickup, the Everest SUV and the Fiesta in Thailand. GM produces the Colorado pickup truck and small sedans led by the Chevy Captiva. Chrysler exports only a few hundred vehicles a year to ASEAN markets.

Since returning to ASEAN in the mid-1990s, Detroit's automakers have encountered stiff resistance from the entrenched Japanese brands. U.S. companies pulled out during the oil shock of the late 1970s.

Led by Toyota and Honda, Japanese brands occupy 90 percent of the ASEAN markets. It takes tremendous effort to convince Thai and Indonesian consumers to abandon reliable Japanese products like the Toyota Corolla and the Honda Civic and their convenient service networks in favor of American cars and trucks. In Malaysia, the Proton and Perodua National Car Programs effectively box out the Americans.

GM, Ford and Chrysler also have found it difficult to compete in small volume markets. ASEAN's 2 million car sales are spread over 10 countries. Thailand and Indonesia -- the region's leaders -- will each achieve sales of 600,000 cars and trucks this year. Next is Malaysia at 500,000 units. After that, annual volumes drop to 150,000 or even fewer in markets such as Vietnam, the Philippines and Cambodia.

In the mid-1990s, Ford and GM set up production hubs in Thailand with the hopes of achieving economies of scale and servicing all markets in the region from one base. But regional economic integration has been slower than hoped and trade in cars is still in its infancy. In the region's top markets, trade tariffs are steep and imports still account for less than 10 percent of sales.

The slow pace of integration finds its roots in the fact that ASEAN countries retain deep differences. In politics, there are military dictatorships (Myanmar), vibrant democracies (Indonesia) and communism (Vietnam and Laos).

Singapore is a rich country while Myanmar and Laos score among the lowest incomes levels in the world. Indonesia is home to 240 million people while Malaysia's population is just 20 million.

Are the Detroit automakers ready to surrender hope in the face of too much Japanese and regulatory resistance? No. At least, not yet.

Their focus for now has shifted to making Thailand a strategic manufacturing base for exports. Thailand will produce 1.5 million cars and trucks this year, more than half of which are destined for export. By 2015, Thailand's vehicle production will climb to 2.2 million per year.

GM and Ford production in Thailand will increase to 300,000 cars and trucks annually during that same period. Ford earlier this month announced a fresh $450 million dollar investment in a green field plant in Thailand to produce the new Focus, starting in 2012.

Detroit's strategy in ASEAN is to ramp up Thailand production and export to more than 100 markets worldwide, while doggedly whittling away at the Japanese stronghold within ASEAN's fast-growing markets.

With a population almost twice the size of the United States and rising incomes, the ASEAN car market is one worth battling for.

From The Detroit News: http://detnews.com/article/20100701/AUTO01/7010357/1148/auto01/Detroit-3-look-East-beyond-China#ixzz0sRGYfuuJ

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Fight off the Hondas and Toyotas close to their home ground and disrupt their comfort zones.

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