By on August 27, 2010

From a week deep in our “How The Hell Did We Miss That” file comes a Reuters report that shows GM considered floating its IPO on the Hong Kong Hang Seng index. GM’s interest in a Hong Kong float has obvious roots: the company is extremely well-positioned in China, where high savings rates and the prospect of steady local sales growth could have helped bring in both private investors and GM’s partner firms. But according to a Reuters source, GM rejected the idea because it would have delayed the IPO past its Thanksgiving deadline

I don’t think signaling goodwill toward Asia is likely to be a significant enough argument for all the cost and complexity. I don’t want to overstate the cost and complexity but it’s not insignificant

But another issue in GM’s decision had to be the possibility of political blowback: though a smaller IPO risks a smaller payback for American taxpayers’ investment in GM, if a Chinese firm ended up with a major stake in GM, opponents could well have charged that the bailout resulted in a giveaway to foreigners (as was the case with Fiat’s takeover of Chrysler). And the role of politics in GM’s IPO planning should not be underestimated. According to a Reuters source, GM’s listing on the Toronto stock exchange is of no real value to the IPO, but

It’s a big thank you to the Canadian government for their role in supporting GM… There’s no logic behind listing in Toronto other than the political factors — none

Meanwhile, the New York-Toronto listing might not prevent a major Chinese ownership stake in GM post-IPO. Hu Maoyuan, chairman of GM’s Chinese partner SAIC, tells the FT that his firm

will watch GM’s IPO closely, and think carefully if we should purchase the shares or not.

SAIC recently bought out the controlling stake in its GM Shanghai joint venture with GM, and took over GM’s Indian operations. This partnership makes SAIC the most logical foreign investor in GM, but once again politics may limit SAIC’s involvement in the offering. Bill Russo, head of the Synergistics auto consultancy in Beijing explains

It becomes an emotional issue that somehow the identity of GM would be transformed from a North American-centred to an Asian-centred company… But that is happening anyway – the global centre of gravity of the auto industry is shifting to Asia

Another anonymous investor adds

I am absolutely certain they would love to have a share . . . but they do not want to upset the US about this.

On the other hand, the early days of GM’s IPO could see some US government-spurred irrational exuberance, and when reality sinks in, SAIC could well end up buying a big GM stake off the open market. After all, once the government releases its shares, it loses its ability to pick nix possible buyers for political reasons. Though GM has anti-takeover rules in its new Delaware-based corporate structure, an acquisition by a partner like SAIC would be considered friendly. And, in many ways, common sense. Though GM’s IPO may not immediately lead to a Chinese ownership stake, greater Chinese ownership of the bailed-out firm seems extremely likely over the medium-to-long term.

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20 Comments on “GM Eyed Hong Kong IPO Listing, SAIC Interested In Stake...”


  • avatar
    porschespeed

    Here comes the stealth Chinese take-over of GM.

    They’re close to closing a deal to do this to the US domestic steel industry.

    If we wish to have any economy left in the US 20 years hence, we need to level the playing field with the Chinese right now.

  • avatar
    MikeAR

    GM will become Chinese sooner rather than later, it really only makes sense, it’s the only market in which they are strong players. The only problem with that is that we won’t ever get our money back and the Chinese will get the company on the cheap.

    The good part is that finally GM will be out of this country and the UAW will be broken. GM won’t sell enough under Chinese ownership in this country and they will pull out very soon after the takeover. Goodbye to jobs and pensions, hope it was worth it UAW.

    • 0 avatar
      CJinSD

      At least we taxpayers got to kick in 80 or so billion to make GM a better value for the Chinese. Reading comments from UAW members and former members, the real cost of organized labor isn’t just reduced productivity, higher prices borne by people who have to work for their money, and the demise of any portable industry in the country. There is also a huge loss in human capital. Union members cease to be individuals with the capacity to think for themselves and face adversity in a constructive way. I’ve worked for companies that became obsolete due to market evolution, due to bad management, and due to the collapse of the real estate industry. When one business falters, I look for another one with the potential to thrive in current market conditions. I don’t just complain that management was incompetent and greedy, or that the politician in the oval office that day was an insecure dolt, or that someone else is willing to do my job better for less. Union types, on the other hand, are somehow taught that their fate lies with their union. They can no more act in their own interest than they can do their jobs for three times what they’re worth without complaining. Eliminating unions is more crucial to the survival of western civilization than any other single threat to liberty. The current situation of organized government workers making an average of 65% more than the productive sector of the population that pays their salary is no more just than any system of slavery.

    • 0 avatar
      MikeAR

      CJinSD, well said.

  • avatar
    CliffG

    The reason for a Hong Kong IPO: Sarbanes-Oxley, or more accurately, avoidance of such. Political ramifications of Government Motors doing a HK IPO to avoid Sarbanes? UmGuh. Not gonna happen, to coin a phrase. I imagine some folks in DC caught wind of that and a few phone calls later that idea was put aside. The benefits to potential equity holders of GM would be huge, but this IPO is only marginally about long term equity holders, and marginally might be overstating it. China will end up owning all of GM’s Chinese operations, but they are not going to have buy GM stock on the NYSE to do it. Hint: It is still a Communist dictatorship (which sends a thrill up Thomas Friedman’s leg, if no one else’s).

  • avatar
    OldandSlow

    Wow, GM under Chinese ownership is a distinct possibility.

    If the word gets out, their market share will definitely take a tumble in the US.

  • avatar
    NN

    won’t happen. Remember UnoCal, or whatever the name was of that California oil producer that was going to be purchased by the Chinese until the media made a huge deal out of it and the Chinese backed off for political reasons? Same thing here…the fact that US taxpayers bailed out a company so the Chinese could take it over is too emotional for the Chinese to come swooping in and do that. They know doing so would be a terrible decision, politically and business-wise. They care more about the latter, and the political backlash in the US of a Chinese takeover would have an immediate effect on GM car sales.

    • 0 avatar
      porschespeed

      I agree that it won’t be blatant like earlier attempts.

      The ChiComs aren’t stupid, they have learned. Though I am loathe to post links, here’s one of dozens that are illustrative of what it happening so I don’t have to retype it…

      http://www.bloomberg.com/news/2010-08-27/china-begs-borrows-steals-american-know-how-commentary-by-peter-navarro.html

      ‘Natch the Chinese will eventually wholly own every JV, or simply compete them out of business. They already have appropriated the IP, that’s the only reason they let JVs happen in the first place.

      This hardly is novel. It happened to the UK, France, and Spain, over the last 500 years. Everyone gets their century or two at the wheel, ours is wrapping up…

    • 0 avatar
      MikeAR

      We may not be in a position to say no to a Chinese GM. They have a lot more leverage over us now than they did then. After all, it will a Chinese automaker, theoretically a private company, unlike CNOOC which was government owned, just buying stock as an investment or to help out their jv partners, whatever. It could easily happen and truthfully it might not be a bad thing. At least it would prove that the bailout was a politically motivated waste of money.

    • 0 avatar
      Stingray

      We may not be in a position to say no to a Chinese GM

      Of course you can, buy the stock. But not only you, million of Americans.

      That way, you say no to the Chinese.

      I’m sure someone is going to say it’s like buying the company twice, because we as taxpayers etc… I say, if you want to keep it American, go and buy the stock. That way it goes from everyone (or no one) property, to a lot of people property. If such thing is valid or reasonable.

    • 0 avatar

      “Of course you can, buy the stock. But not only you, million of Americans.”

      I think most Americans would prefer to see the ChiComs take a bath on GM, rather than themselves (again.)

    • 0 avatar
      porschespeed

      Stingray,

      How exactly would US stock ownership preclude a sellout to the Chinese?

      There’s are innumerable ways to set-up a publicly traded company that will allow the BoD, and/or preferred shareholders total control over selling a company.

      Beyond the front-door middle-finger, there are dozens of deals that can be done which will effectively BK a company and leave it in the hands of whichever creditor you desire. Common shareholder input will be irrelevant.

  • avatar
    cmoibenlepro

    The Russians were not able to purchase Opel (even if Germany agreed). I don’t think US gov’t will let the Chinese purchase the whole company.

  • avatar
    wallstreet

    Gang ! Who here will buy GM common stock? I’ve high interest on the short side.

  • avatar
    BDB

    The Chinese takeover won’t happen, but part of me wishes it would just to see the reactions from Bertel Schmitt on one end of the spectrum and Silvy on the other! One will need Lithium, the other, Prozac.

    If on the very off possibility it does, expect Ford to pick up a big chunk of GM’s North American market share. For those that weren’t turned off by the bailout, they will be turned off by foreign, especially Chinese, ownership. If it comes to pass their biggest mistake will have been not hooking up with Nissan-Renault when they had the chance.

    • 0 avatar
      porschespeed

      BDB,

      So… the fact that buying cheap ChiCom everything not only does not bother the average American, but they now cannot survive without it, is not relevant?

      A Chinese Chevy that was even cheaper than the current Chevy would somehow stimulate that Patriot gland?

      Really?

    • 0 avatar
      BDB

      Automobiles are more emotional purchases than cheap plastic crap or sneakers.

      Almost nobody asks where their clothes are made, but a hell of a lot of people ask where their car is made. Honda fanboys give their right arms to get a “real Japanese” Honda, Kia uses (in radio ads) their manufacturing facility in Georgia as a selling point, Volkswagen markets their (*snicker*) “German engineering”, and anti-Ford trolls keep telling us the Fusion is made in Mexico, just to name a few instances where this comes up both on the blogosphere and real life.

      Let’s do a thought experiment. Your screen name suggests your a Porsche fan. Would you still be one if Porsche got bought by Hyundai and moved Porsche’s manufacturing to Pusan? Or worse, started basing them on Hyundai platforms?

      I haven’t even touched on safety, where there’s at best a perception gap and at worst real danger in Chinese-made goods, and safety, again, is a big deal in car purchases

      EDIT: To add to that, we’re talking about what’s left of the GM fanbase, and they DO buy those vehicles in large part because they’re made by an American company. Just look at the advertising. “Heartbeat of America”, “This is Our Country”, “Baseball, Apple Pie, Chevrolet”, and so on.

    • 0 avatar
      porschespeed

      BDB,

      Honestly, I know the Chinky product is garbage, but I also know that Harbor Freight does well for a reason.

    • 0 avatar
      BDB

      You don’t have to trust your shoes. You don’t have to trust your socks, or cheap plastic. You don’t even REALLY have to trust your TV or iPod in the same way you do your automobile.

      Before someone goes the obvious route, Japanese cars were never garbage. They were percieved that way because they were small and everything from Detroit was big, but they were well-engineered little cars. You’ll notice that, for example, Toyota never had to find a foreign partner for a JV so they could rip off IP. Hyundai, yes, made garbage and first. And it damn near killed them in this market. And it HAS killed other brands that tried to penetrate the North American market in the past.

      I just don’t see an angle for the Chinese in this market. The domestics have the patriotism card. The Japanese have reliability and the perception of greater fuel efficiency. The Germans have sportiness and prestige. The Koreans have value for the money, a market they will NOT give away seeing how profitable it is for them.

      Regardless, GM’s angle (and to a lesser extent, Ford’s) is buying an American-made (as in, the company is American) vehicle. Being Chinese owned would instantly alienate their fan base overnight.

    • 0 avatar
      porschespeed

      I agree about shoes and such.

      But, I’ve found my Harbor Freight drill/mill and HF lathe to be close enough to Brown&Sharpe not to matter.

      No, they aren’t made as well. No, they aren’t as accurate.

      But in the world of 10thousandths, they are close enough for most automotive projects.


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