When news came out that GM would sell a critical 1 percent of their Chinese joint venture to SAIC (now owner of a 51 percent majority,) and that GM would sell half of their Indian operation to SAIC, rumors swirled that GM would sell-out their future in the world’s only remaining growth markets to raise cash for Opel. It doesn’t seem that way. GM is mortgaging their future at the pawn shop for pocket change. A whacko report even claims that GM is already under Chinese control …
First, the critical controlling 1 percent in the Chinese joint venture was practically given away for $85m.
Now it has been confirmed that half of GM’s India operation is changing hands for a mere $500m. This amount has been confirmed by GM officials to India’s Business Standard.
GM is getting less than book value. GM officials told journalists in India that the company had invested $1b in India since beginning operations in 1994. “The $1 billion includes setting up the Talegaon vehicle and power train facilities, Halol car plant, the Gurgaon office and a small portion towards setting up the research and development facility (GM Technical Centre) in Bangalore. About half this amount has been sold to SAIC,” said P. Balendran, director & vice-president of corporate affairs. The R&D centre will continue to remain a 100 per cent subsidiary of GM, USA.
For half of GM’s investment, SAIC is getting something of great value. Access to the Indian market which had been closed to Chinese companies.
The money most likely will flow right back into India. SAIC and GM-US formed a 50:50 joint venture investment company called General Motors SAIC Investment Ltd (GMSIL), based in Hong Kong. The new company was capitalized with $100m, and will invest $650m to update the joint venture’s plants in India.
As part of the $650 million expansion, GM and SAIC will launch small cars and utility vehicles in India, starting in the second half of 2011.
GM’s moves are getting curiouser and curiouser. In Europe, they are hanging on to a money losing Opel they cannot afford, and they are sending it to its certain death by ordering Opel to focus on Europe, a market saturated with cars and production capacity. At the same time, GM is giving up control in the world’s biggest and fastest growing market, and is selling half of its share in the world’s second fastest-growing auto market.
There is a whacko report out there that claims that GM is already under the de facto control of China, and that GM’s bankruptcy “was all part of a well orchestrated strategy launched over two decades ago by Beijing to capture the US auto industry.” Watching GM’s recent moves, we could begin to be convinced that the report has at least some merit. Until we come to the final piece of the report where they urge GM to stop “casting around for a Chinese to lead the company” and where they recommend putting Bob Lutz in charge of GM. Is there a doctor in the house? A bunch of burly medics? Restraints?