TBY talks to John Stadwick, President & Managing Director of General Motors Middle East, on the significance of the region, investment in its parts distribution center, and outlooks for the auto market.
THE BUSINESS YEAR How important is the GCC region for the global operations of General Motors (GM)?
JOHN STADWICK Extremely important. Considering GM’s 100-year history and where we will be in the next century, emerging markets are the driver of growth in the automotive industry. Currently, over 60% of our sales are completed outside of North America, and going forward we seek to further strengthen our position in the Middle East. The Middle East is set to grow faster than most regions in the world over the next decade. We are forecasting that total industry vehicles sales in the Middle East will grow from about 1.15 million units in 2011 to 2.1 million units by the end of the decade—reflecting approximately 85% growth. This would make the Middle East one of the world’s fastest growing automotive markets outside the BRIC countries of Brazil, Russia, India, and China. This is due to the positive economic outlook for the region, particularly due to strengthening oil prices, and favorable demographics. Educational levels are increasing, the middle class is expanding, and about 60% of the population is under the age of 25. These elements are very beneficial for the automobile business. Many consumers are buying their first car, and a variety of others are upgrading to larger and more expensive vehicles. With our portfolio of brands and models, we are able to sell vehicles to meet all these needs and wants—from entry-level to luxury cars. GM’s portfolio in the Middle East reflects that with Chevrolet, GMC, and Cadillac all positioned for growth. As an example of the importance we place on the Middle East, we had the world premiere of the all-new Chevrolet TrailBlazer SUV at the Dubai International Motor Show in November 2011—the first time that GM has globally unveiled a vehicle in the region. We also made a $70 million investment in our parts distribution center in Jebel Ali, Dubai, and recently refurbished our offices. We wouldn’t be making these types of investments unless we viewed the Middle East as a growth engine for GM.
What are the benefits of Dubai versus any other emirate or city in the region?
We offer vehicles sourced from five different continents and our Parts Distribution Center, located in Jebel Ali, Dubai, stocks over 80,000 different parts sourced from more than 300 suppliers and distributed to 55 Chevrolet, Cadillac, and GMC facilities across the Middle East and a further 26 locations in Africa. We need a location that has world-class logistics and infrastructure—and there is no better place in the Middle East than Dubai. No city can match its shipping and logistics capacity. Furthermore, Dubai boasts the region’s best health care and educational provision, and has a strong professional services sector, including finance, marketing, engineering, and sales, which all multinational companies require. Dubai is also a great place to attract top talent and retain those employees.
How would you categorize the car market and automotive industry in the region?
Across the globe there are economies experiencing peaks and troughs. I would classify the Middle East as a market that is stable. The overall automotive market registered only 1% growth in 2011. However, GM was able to outpace the market and register 13% vehicle sales growth in 2011. And, in January and February 2012, we registered a record sales performance. Much of this success can be attributed to the products that were launched over the past 18-24 months, such as the Chevrolet Sonic, which were well received in the marketplace.
Where is your product revenue stream focused in terms of your three brands?
The Middle East is not a homogenous market. Our portfolio of brands, which cover a wide range of products, allow us to meet the needs and wants of a variety of segments across the region. For example, in Lebanon, fuel-efficient and low-priced small and sub-compact vehicles are very popular. This is due to the local tax regulations and the price of fuel. Saudi Arabia, however, is known for its large families and the price of fuel is relatively inexpensive. Therefore, large cars and SUVs are very popular in the country, including our Chevy and GMC trucks. In Dubai, luxury vehicles are very popular and our Cadillac models, such as the CTS, CTS-V, SRX, and Escalade, are performing extremely well. We are able to meet the needs and demands of every consumer and market across the Middle East.
What was the strategy behind the $70 million investment GM made in its parts distribution center in Dubai?
Our main strategy is to ensure we provide every Chevrolet, GMC, and Cadillac customer with a world-class shopping, buying, and ownership experience. The Parts Distribution Center plays a major role in delivering this promise. It is one of the most efficient facilities of its kind in the world, and it is fitted with the latest technology and IT systems. It stocks over 80,000 different parts and deals with more than 1 million parts orders every year to ensure all GM customers across the region can be supplied with any required vehicle part within 48 hours.
How did the recent economic crisis impact your regional operations?
It has actually helped us as we underwent some significant restructuring within the company. In the past, if the economy was booming we would invest heavily in the development of new products, but during a downturn we would pull back and decrease our investment in R&D. Today, we have built a fortress-like balance sheet, which enables us to invest in designing and engineering new vehicles whether the world economy is in a boom or slump—ensuring that we will always be able to offer the very best vehicles in the marketplace. Going forward, we plan to continue to invest $7 billion to $8 billion a year in R&D, design, and engineering to ensure that we can continue to launch great new products during different economic and business cycles. It all starts and ends with great products. And, I firmly believe that our ability to design, build, and sell the world’s best vehicles is behind our success in the Middle East over the last few years. With six new products to be launched in 2012, we expect to continue the same momentum and growth this year. In the UAE, we closed the last quarter of 2011 up 20% in year-on-year terms. In the first two months of 2012 we added another 20% to our sales. This is due to having great products supported by great service.
This interview will be published in 'The Business Year: Dubai 2012'. To pre-subscribe please e-mail us at info@thebusinessyear.com
© The Business Year - May 2012