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Stalled Project: What’s Good for General Motors Is Not Good for Egypt

October 15, 1988

CAIRO, Egypt (AP) _ General Motors Corp.’s ambitious Egyptian compact car project, brought in with a bang 2 1/2 years ago, has crept out with a whimper.

While GM says it expects the project to be revived, Egyptian officials appear convinced that the whole idea is a thing of the past.

″At this point we are waiting for the Egyptians to take a step, to give an indication which way they are about to proceed,″ said John Pekerek of GM’s international public relations office in Detroit.

″We’ve indicated to the government our presence and our (continuing) interest.″

Egyptian officials, on the other hand, say they’ve heard nothing of the project since its kickoff in 1986.

GM announced the project in June of that year, for the creation of General Misr Co., a joint venture with the government’s el-Nasr Automotive Co.

General Misr was to build and market Opel Corsa compacts and mid-sized Opel Asconas with production to begin by mid-1987, according to the GM plan. Additionally, the plan envisioned the manufacture of auto parts for export to markets in the Middle East and to Opel headquarters in West Germany.

The announcement was accompanied by a lavish reception for press and officials to celebrate the occasion.

But by May 1987, el-Nasr Automotive had decided, with little fanfare, to pull out. The decision followed ″a setback from there (Detroit), for internal GM reasons,″ Ezzeldine Heikal, el-Nasr’s president, told The Associated Press.

He refused to elaborate on the setback or the reasons, except to say that ″the founders-to-be decided the subject was not economic. We decided to end it. It is finished.″

As a result, Egypt’s compact car industry lost a proposed loan from the U.S. Agency for International Development of $30 million to $35 million that had been earmarked for the project.

An American source said since the merger never took off and there was no formal request for the loan, money never was allocated.

In Detroit, GM officers acknowledged el-Nasr’s withdrawal and say the giant company has found no substitute. But they said GM has not written off the project and remains optimistic.

The chairman of Egypt’s General Authority for Investment, Mohieddin Ghareeb, said his office gave the go-ahead but he understood that problems cropped up between the two parties.

″The project ended,″ Ghareeb said, and since then, ″nobody has presented anything to us.″

Ostensibly a private organization, Ghareeb’s agency gives or withholds the green light for private-sector projects in consultation with a variety of ministries including labor, industry and agriculture.

″It’s been two years since we talked about the GM Opel car,″ said Yousef Mazhar, undersecretary of state at the Industry Ministry. ″They (GM) have not pursued their first interest in passenger cars. Studies they put together showed it would be highly priced.″

Western diplomats agreed that the ″price issue was at the center″ of the misunderstanding between the two sides but also were hopeful for an eventual rebirth of the project.

″The two sides have different expectations of what the market can handle,″ said a diplomat who spoke on condition of anonymity.

″That deal as originally thought through is not going to work ... for a number of reasons. The price issue is at the center of it,″ he said.

Nevertheless, he warned: ″Be careful. Don’t write the GM project off. The GM relationship with Egypt is not over.″

GM has shared a long past with Egypt. It began with a busy assembly plant in Alexandria on the Mediterranean coast, which was nationalized with scores of other industries by the late President Gamal Abdel Nasser in 1961.

The American automaking giant made a comeback in the early 1980s, after Egypt moved away from Nasser’s socialism to welcome private foreign investment again, and set up a truck manufacturing plant on the outskirts of Cairo.

The 1986 announcement of the compact-car project said GM would provide 30 percent of the new company’s capital. The rest was to be held by Egyptian investors including el-Nasr, wholly owned by the government. The project’s estimated cost was to have been $171 million.

Detroit said the new venture would have ″complemented″ General Motors Egypt, a joint-venture company manufacturing and distributing commercial vehicles here since 1984.

Initially, 52 percent of the components of the compact cars would have been made in Egypt, with plans to increase that percentage to 80 percent in 10 years.

Mohamed Razzaq, the Pakistani-born general manager for GM Egypt, refused to discuss the stalemate in the compact-car project or answer questions about it.

The demand for cars in Egypt totals about 40,000 to 60,000 a year. El-Nasr imports automobile parts, mostly from Italy’s Fiat, and combines them with locally made parts to manufacture a family-sized car and two smaller models.

End Adv Weekend Editions Oct. 15-16

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