By on November 10, 2010

When the all new GM share starts trading on 11/18, the bulk of the new issue will most likely not be owned by widows and orphans, but by foreign governments and their proxies. One of the largest new shareholders could be Chinese. GM is in the final negotiation stage to sell a good chunk of their new stock to their old pals and Chinese joint venture partners SAIC, reports Reuters, citing the usual “two people familiar with the matter.” And don’t think they are just talking percentages, there is much more on the table.

GM and its investment bankers have been and are busy schmoozing overseas sovereign wealth funds (read governmental investment arms) to take $2b of the $13b offering. If they take more, please, they can have it. “GM and its bankers have not set a maximum value for investment by sovereign wealth funds,” Reuters reports.

One of these anchor investors will definitely be SAIC. SAIC’s Vice Chairman Chen Hong is in the U.S., and a deal could be finished by this weekend, Reuter’s sources say. The “single digit” stake originally contemplated could grow another digit. And of course, it’s not just about stock appreciation and dividends. In the choice words of Reuters:

“The two government-funded automakers are currently finalizing how much of a stake SAIC would buy in the top U.S. automaker after discussions involving technology sharing and SAIC’s ambitions to move beyond the China market.”

In less opaque words: SAIC will drop cash on GM, but apart from shares, the real price will be cheap (or free) patents, and access to GM’s markets for made-in-China cars with a Buick or Chevy (or why not Cadillac) nameplate. Selling Sails to South America, or letting SAIC ride into India in a Trojan horse built by GM are simply templates for more things to come. As if ceding control of the world’s largest growth markets is not enough already.

That should give the “who cares where the money comes from as long as it goes to America” crowd at least a second of its short attention span.

The many years of U.S. howling about a higher rate of the Chinese yen, to which China recently relented a bit, and the current weakness of the dollar in the international currency markets (which made German economy minister Bruederle –yes the same that turned off the money spigot for Opel – brand the U.S.A. as a currency manipulator) make the investment even more attractive. Cheaper dollar, cheaper GM. Wasn’t it supposed to buttress U.S. exports and dampen Chinese ambitions?

Of course, any deal between GM and SAIC would need Chinese government approval, and at least a nod from inside the Beltway. With both companies being on tight governmental leashes, they will only do what their masters allow.

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11 Comments on “(Chinese) Government Motors...”


  • avatar
    Daanii2

    That’s funny. I thought sure the Chinese government would privatize its top carmakers before the US nationalized its top carmaker. Guess socialism won out over capitalism.

  • avatar
    Trend-Shifter

    “That should give the “who cares where the money comes from as long as it goes to America” crowd at least a second of its short attention span.”

    Guilty as charged…

    Question, not a statement:  Would it be true that stock ownership only allows you to vote on the proposals of the board?   If so, they could only get the keys to GM if a given entity could buy a majority stake.    

    • 0 avatar

      Please re-read the ““The two government-funded automakers are currently finalizing how much of a stake SAIC would buy in the top U.S. automaker after discussions involving technology sharing and SAIC’s ambitions to move beyond the China market” part.

    • 0 avatar
      Trend-Shifter

      I did read that statement.
      However I was under the impression that not all of GM shares were on the table at this initial offering.   That would make it difficult to acquire a + 50% ownership with other suitors in the mix.    

  • avatar
    Rod Panhard

    It’s hilarious. Think back to all the people who screamed, “We’ve GOT to save GM! They saved us in World War II. GM is a critical part of our defense system!”
    And now, they’ll be partly owned by the People’s Republic of China…who we fought in Korea.

    • 0 avatar

      If Emperor McArthur  would have heeded repeated warnings and would have stayed away from the Yalu river (Chinese border), and if he wouldn’t have run off at the mouth and threatened to nuke China, the Chinese would not have entered the war. When McArthur was sacked, it was too late.
      Contrary to popular wisdom, the Chinese are peaceful people. They are just sick of being invaded, They have been invaded for thousands of years. They now are a bit protective of their borders. As long as you understand that, you can get along with them just fine. They have no intention of invading anybody, they have more land than they can manage.
      Chinese are first and foremost business people. War is bad for business. Except if you are in the arms business.

    • 0 avatar
      Zackman

      Bertel, I agree with you. Ask (or read) any former Flying Tiger or any of Doolittle’s Raiders what they thought of the Chinese and youl’ll scarcely find a discouraging word! I once read or heard a quote that the Chinese “were our kind of people”.

      Honestly, people in general just want to be left alone and live in peace, regardless of ethnicity.

      What goverments do, however, is another story. If the Chinese are that willing to invest in everything American – well, let them. Maybe they have some better ideas of what and how cars should be designed, built and marketed.

    • 0 avatar
      Steven02

      Rod,
      Japan was invading China in WWII.  We were allies with China during that time.  And, in Doolittle’s raid, we landed our planes there.
       
       
      Times have changed and perceptions of both nations have changed.

    • 0 avatar
      Rod Panhard

      Yeah, yeah yeah, I know all that about China, the history they have with Japan that goes many centuries before Japan invaded Manchuria, did horrible things, and renamed it Manchukuo, pre-dating 1933 and all that.
      My point is, a LOT of people were adamant that GM “must be saved/bailed out because of vital defense interests.” I eagerly wait to hear from them if/when SAIC actually does own chunks of GM in the next few days. It should make for some good television.

  • avatar
    jimboy

    Americans need to be very careful about who owns what in the future. China already owns a huge amount of U.S. debt. Here in Canada, most of our resource industry is foreign owned, and our governments call the shots in name only. That is a scenario I think most Americans would prefer to avoid.

  • avatar

    The teabaggers won’t like this one bit…


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