GM East Africa denies Isuzu buyout claim

General Motors East Africa (GMEA) has found itself in a spot of bother.

Firstly, the motor vehicle assembler, associated with Isuzu and Chevrolet brands of vehicles, is losing market share to Toyota.

Secondly, the firm’s closure of some dealer outlets in Western Kenya and the Rift Valley, for what sources termed as unclear reasons, has left disgruntled traders in its wake.

Thirdly, GMEA’s parent company — the American automobile giant General Motors — has recalled more than 2.6 million faulty cars worldwide. This is creating safety headaches for the newly appointed GM chief executive, Ms Mary Barra, who assumed office in January.

GMEA used to hold the largest share of the Kenyan motor vehicle market, mostly as a result of selling Japan’s Isuzu commercial vehicles, which include buses and lorries.

This was a market GMEA had a near monopoly on, with almost every school in Kenya that was looking to buy a bus settling on an Isuzu.

But the company’s lead has steadily been eroded by Toyota’s decision to start selling the Hino brand — another Japanese maker of commercial vehicles.

According to figures from the Kenya Motor Industry released last month, Toyota now controls the Kenyan market, with a 32 per cent market share in the first half of 2014. This is a huge increase from the 21 per cent it held last year.

GMEA is in second place, with a 25 per cent market share.

Market share

For Izusu, how GMEA could be losing out so fast in terms of market share is unsettling. What is more, it is to another Japanese dealer, Hino, which is winning control of the lucrative commercial and diesel engine market.

Could Izusu break away from GMEA and start distributing its own brand

This is a question many GMEA dealers in Western Kenya are asking, as well as whether they should stick with the Isuzu brand or join the Hino bandwagon.

According to sources who spoke to Business Beat, GMEA dealers in Nakuru, Busia, Bomet, Kericho and Kisumu are getting jittery about the position Hino is in because it enjoys Toyota’s financial muscle.

They have also taken issue with GMEA’s appointment of new dealers, which they allege is not being done transparently and could give the competition a chance to gain an even bigger foothold in the region.

In response, Mr Geoffrey Mulandi, GMEA’s sales and marketing general manager, dismissed concerns about any form of backlash over dealer appointments.

He said his firm has commissioned a new dealer, African Commercial Motors Group (ACMG), to cover Western and Rift Valley regions in an exercise that was above board and free of controversy.

“GMEA regularly evaluates its appointed dealership and can terminate contracts on the basis of its evaluations. We will endeavour to cater for and satisfy all our customers in different regions,” he said.

He also dismissed as “speculative and untrue” rumours making the rounds that Isuzu could decide to enter the market under its own name and take over GM operations.

He also described as “blatantly false and unfounded” claims that Isuzu Motors had begun the process of taking over manufacturing facilities in Nairobi, pending an agreement on price.

“The GM sign is not coming down at all from its prime site along Mombasa Road [in Nairobi] to give way to an Isuzu flag. Those are arrant falsehoods,” said Mr Mulandi.

Global recalls

He added that the global recalls have had virtually no impact on the Chevrolet model, which is one of the most popular GM vehicles in the East African market.

The ignition fault, which shuts down affected vehicles’ engines and disables airbags, is alleged to have led to an estimated 303 deaths.

Centum and the Industrial, Commercial and Development Corporation (ICDC) are the two leading local investors in GMEA, with a combined 38.7 per cent stake. General Motors of the US has the largest stake at about 57 per cent.