Thailand May Urge Banks to Lend Money to GM, Foreign Automakers

By Daniel Ten Kate and Arijit Ghosh

Feb. 21 (Bloomberg) -- Thai Prime Minister Abhisit Vejjajiva said his government may help foreign automakers including General Motors Corp. by nudging commercial banks that are reluctant to lend as a global recession deepens.

“What might be helpful is some kind of credit facilities which would be done through a commercial bank system,” Abhisit said in an interview late yesterday in Jakarta, where he is on a two-day visit. “The government is not in a position to provide” cheap loans, he said.

GM is seeking as much as $16.6 billion in new loans from the U.S. and another $6 billion from Canada, Germany, the U.K., Sweden and Thailand to sustain operations. Earlier this month Thailand recapitalized a state agency that shares credit risk with commercial banks in an effort to spur 100 billion baht ($2.8 billion) in lending to small businesses.

GM’s Thailand unit needs the money to move forward with a 15-billion-baht diesel-engine plant announced last year. The plant and another pickup truck line are “no longer feasible” without government help and are “suspended indefinitely,” the company said on Feb. 18.

“The reason we’ve worked with the government is that commercial banks on their own are pretty cautious these days,” Steve Carlisle, the company’s head of Southeast Asia operations, said in a telephone interview yesterday. “We all need to get together and make a good assessment of what the future holds and what’s the right thing to do in supporting industry.”

Manage Cash

Detroit-based GM has received $13.4 billion in loans since December. Conditions attached to the funds have constrained the company’s ability to manage cash globally as it had done in the past, forcing its foreign units to restructure or seek help from their host governments, GM said in a Feb. 18 filing.

“The discussion is not quite as far along in Thailand as it is in other places,” Carlisle said. “What we are encouraging is demand stimulus on one hand and on the other hand some assistance with loans to fund future product programs.”

The company will make a decision on whether to proceed with its diesel-engine plant by the end of the third quarter, Carlisle said. The factory’s opening has been pushed back to May 2011.

“If we can’t fund it then we’re going to have to look into other alternatives,” Carlisle said.

Thai Unit

GM’s Thai unit cut 790 jobs this year and slashed production by 56 percent to just under 50,000 units. The company may see sales drop “a bit more” than the 15 percent decline estimated for Thailand’s auto industry, Carlisle said.

Thailand’s government plans to meet with automakers to design a rescue package for the industry, Abhisit said. The private sector has proposed excise tax cuts that would reduce vehicle prices by as much as 50,000 baht and help for consumers to access car loans, Carlisle said.

“I don’t think an excise tax reduction is going to have a dramatic impact on demand,” said John Bonnell, director of forecasting for JD Power & Associates’ Asia-Pacific operations. “It may stimulate demand somewhat, but any way we look at it, it will be a tough year.”

Vehicle sales amounted to about 8 percent of Thailand’s exports last year, according to the Finance Ministry. Thailand is the world’s fourth-largest maker of light commercial vehicles.

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Arijit Ghosh in Jakarta at aghosh@bloomberg.net