Formosa Automobile Corp., which currently produces and markets car models designed by Daewoo Motor of South Korea, announced recently that a proposed cooperation project with General Motors of the United States might run aground if GM refuses to compromise on its terms.

Formosa Auto is a wholly-owned affiliate of the Formosa Plastics Group (FPG), Taiwan's biggest petrochemical conglomerate. The ties between FPG and its Korean technical partner have been relatively loose, with the Taiwanese company buying technology, molds, and dies instead of importing parts and components from Korea for assembly in Taiwan. This indicates that Formosa Auto, under the direction of its parent group, has plans to develop other kinds of vehicle products. In fact, it is already cooperating with other foreign partners on the development of pure-electric cars and hybrid models using gasoline/electric or liquid petroleum gas (LPG)/gasoline power.

After it acquired most of Daewoo's profitable operations last year, GM began discussions with Formosa Auto with the aim of boosting its share of Taiwan's domestic auto market as well as deploying a division-of-labor network between Taiwan and mainland China.



In late 2002, GM tried to further integrate its auto-production resources in the Asia-Pacific region by allowing both Shanghai GM (a 50/50 joint venture between the American company and mainland China's Shanghai Automotive Industry Corp.) and Formosa Auto to manufacture the Nubira sedan, which was developed by Daewoo but will be sold under the Buick brand beginning this year.

FPG chairman Y.C. Wang has stated that his group will not accept GM's demands that all Nubira cars produced in Taiwan should bear the Buick logo alone, and that Formosa Auto's established auto-sales network be merged into GM's Autoworld chain in Taiwan.

Wang, who has an international reputation for tenacious negotiating, warned that he would have Formosa Auto cut off its talks with GM unless the latter dropped these demands. Sources familiar with FPG's operations say that the group may seek cooperation with other major international auto manufacturers.

Both GM Taiwan's imports and locally produced models are performing poorly on the island, and GM has struggled in its efforts to boost its share of the domestic market. It has now targeted a 5% market share by 2005.

Under its overall brand strategy, GM wants its Taiwan partner to turn out cars bearing only the Buick brand. This conflicts with Formosa Auto's current practice of turning out cars (the Matiz mini car and the Magnus sedan) that bear both Daewoo's and its own logos.

Wang insists that his development of non-gasoline vehicles should remain independent from any joint venture that eventually emerges.

Formosa Auto president Chang Jin-lung has said that the cooperation project is sure to be delayed or cancelled. GM, according to other sources, has been looking around for other possible partners in Taiwan.

Formosa Auto officials say that plans to introduce their third locally made Daewoo model, a small/medium sedan with an engine displacement of 1600/1800cc, in the third or fourth quarter of this year will not be affected by GM's acquisition of Daewoo or by the problems with the cooperation project.

Officials at the Taiwan car maker say that they are fully prepared for the worst, and confirm that they are in contact with several international auto manufacturers about possible cooperation. They note, however, that Formosa Auto will continue to insist on embellishing the cars it makes in Taiwan with its own logo.