Wheels of fortune

On track: Johnsson is convinced that the region’s auto market will continue to grow.

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Full range: The US manufacturer offers a wide variety of vehicles, from sports cars to four-wheel drive off-road trucks.

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Our business has doubled in three years, and will have tripled by the end of next year," smiles Terry Johnsson, managing director of General Motors (GM) Middle East. "It's definitely a nice part of the world in that sense: Everyone's growing."

It's about time that the US manufacturer saw some growth. Despite marketing its vehicles in 33 countries, and selling 9.1 million GM cars and trucks last year - under brands including Cadillac, Chevrolet, GMC, HUMMER, Opel and Saab - these are dark days for the American automotive giant.

Just last week, GM lost its title as the world's largest carmaker, to Japanese manufacturer Toyota. According to the latest figures, GM sold 2.26 million cars and small trucks globally in the first three months of 2007. That compares with Toyota's sales of 2.348 million during the same period. Moreover, while it is predicted that the Japanese company will produce 9.42 million vehicles this year, analysts believe GM is unlikely to increase production above the figure of 9.181 million it reported for 2006.

Looking at the bottom line, Toyota made over US$18.4bn in operating profits for 2006. At the same time, GM lost US$2bn worldwide, and the previous year, the company reported a loss of US$10.4bn. That the company has managed to at least reduce its losses comes as a result of a series of redundancy programmes and closures - in all, GM has closed 12 plants and cut more than 34,000 jobs in an attempt to stem the hemorrhage.

In the US, GM's sales fell 7.7% in March from a year earlier, and the company's market share dipped to 22.9% from 23.9%. Meanwhile, Toyota saw sales rise 7.7%, Nissan had a 3.9% gain, and Honda said it was in for a record year. During the same period, Toyota managed to boost its market share to 15.6% from 11.2%.

"In the US, we're paying the price of several decades of just not having a product that really appealed," admits Johnsson. "Now, I'd say that over the last three years there's a new wave of product that's been coming out and winning awards and has been dynamite in the marketplace. So in the US there's very much a switch.

"We have to work really hard to halt the slide and change perception, and turn things around - but now we have the product that will win hands-down," he insists. "It's so far from what it used to be ten years ago. We turned away a lot of loyal families over a couple of decades, so now we've got to work extra hard to win them back one at a time. It's going to take a long time, and we're prepared for that."

In a business world that typically instructs its executives to ‘tow the line' and present a united front against its critics, Johnsson is refreshingly candid about GM's past failings. Then again, he can afford to be - it would seem that GM's Middle East performance is the antithesis of the carmaker's domestic struggles.

"Here, you don't have the negative perception issue, and you can really win with that," smiles Johnsson. "We haven't spent 20 years alienating Middle East customers, in the same way as we have done elsewhere, and particularly in the US."

As a result, sales growth in the Middle East has continued into the first quarter of 2007, with total sales in January, February and March of 30,679 units - an increase of 16% over Q1 2006. GM witnessed the strongest ever March month of sales in the region, the 41st consecutive month of record sales, making Q1 the best ever year to date performance for the auto manufacturer.

"We're in a great window of a high-liquidity environment, great consumer confidence, young demographics, a very enthusiastic dealer network, and a fabulous product lineup. We really should be doing well," insists Johnsson.

Growth is consistent across almost all Middle East markets, driven in particular by Saudi Arabia, which traditionally accounts for about 60% of GM's total regional sales. In the kingdom, sales grew by 20% to 18,857 units in the quarter. Meanwhile, sales in the United Arab Emirates, another key market for GM in the region, grew by an impressive 17% to 4186 units. Sales in Oman were up 33%, Bahrain sales up by 10%, Qatar sales were up 81% and the Levant markets saw sales increase by over 15%.

In 2006, GM in the Middle East registered a 24% increase over figures recorded in 2005, and Johnsson attributes this explosive growth to a series of factors. Not only has GM managed to shrug off the stigma associated with its domestic mistakes, the company is able to source cars from all over the world, using Dubai as a convenient logistical hub through which to direct traffic. Additionally, the company has built strong, lasting relationships with key dealers throughout the region.

"These are families with whom we have 40 or 50 years of relationship," he says. "Some of the first dealers in the region at all were our dealers, and these are great relationships with prominent business families, who believe in where we're going and are investing enormous amounts in facilities and land."

Such investment is not the sole preserve of dealers. As well as a parts distribution centre in Jebel Ali, and a partnership with Dubai Men's College, GM is committed to a unique nationalisation programme in Saudi Arabia, which has been officially recognised by the Saudi government as the benchmark for training young nationals.

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