Hyundai benefits from struggles of GM Korea unit

Troubles at General Motors are proving a chance for South Korea's Hyundai Motor Group, the world's number 5 automaker, to muscle in on GM Daewoo's lucrative small car export business, including to neighboring China.

General Motors' lurch through the financial crisis has meant its Korean subsidiary, GM Daewoo Auto and Technology, has delayed the launch of new models, lost sales and struggled to convince its main banker to roll over loans.

"South Korean and Japanese makers are expected to take GM's market share, but Korean makers have more small cars with cheaper prices," said Koo Zayong, co-head of equity research at Nomura International Ltd in Seoul.

GM, criticized at home for focusing too much on producing gas guzzlers, relies heavily on its South Korean unit for the design, engineering and development of its offering of small cars, including the Chevrolet Aveo.

It bought a majority stake in failed Daewoo Motors in 2002 and the unit now accounts for about a quarter of GM's total auto production.

PRODUCT DELAY, SALES FALL

GM Daewoo has postponed the launch of its T300, GM's next generation small car, to January 2011 from next April, according to GM product development plans obtained by Reuters from an auto parts maker.

"With the lack of proper and timely investments in small cars at GM Daewoo, it will take much longer for GM to stabilize," said Kang Sang-min, an auto analyst at Tong Yang Securities.

Sales by GM Daewoo, which exports more than 80 percent of its production, dropped 44.5 percent during the first four months from a year ago, despite a steep fall in the value of the Korean won.

That compares to more modest drops of 11.8 percent at Hyundai Motor Co, the maker of Elantra compact car, and 14.5 percent at affiliate Kia Motors Corp.

Hyundai says it plans to bite into as much of the market share of GM, and fellow ailing U.S. automaker Chrysler CBS.UL, as it can in the current environment.

"About 30 percent of customers of GM and Chrysler are expected to look for other brands ... and we will do our upmost to catch as many of them as possible," Hyundai's Chief Financial Officer Chung Tae-hwan said in April.

Hyundai is targeting a 5 percent market share in the United States this year, compared with 3 percent in 2008. By April, the average already stood at 4.3 percent.

A big focus is on China, which overtook the United States as the world's largest car market in January.

There, Hyundai is aiming at 36 percent growth in sales this year to 400,000 vehicles. Its Chinese subsidiary sold 155,589 vehicles during the first four months, up 69 percent from a year earlier and making it the firm's second biggest overseas market.