Will SAIC Buy Into GM? Decision Imminent

In the politically and emotionally charged discussion whether Chinese interests will buy a chunk of GM in their IPO, one decision appears imminent: Will SAIC, GM’s joint venture partner in China, take the bite or eschew the lure? India’s Economic Times, always with a wary eye on happenings on the other side of the Himalaya, says that “top Chinese automaker SAIC Motor is close to making a decision on whether to buy a stake in its long-time partner General Motors as the US auto firm goes public.”

Buying some of GM would be a logical choice for SAIC. After all, China is GM’s largest market and will be ever more so. Without China, GM would be long dead. Another alternative would be a Chinese sovereign wealth fund. Both would be under Chinese government control. SAIC is dominated by the Shanghai municipal government, whereas a sovereign wealth fund would report to Beijing.

SAIC chairman Hu Maoyuan already went on record that taking a chunk of GM is in the cards. “GM and SAIC is the most successful partnership in the Chinese auto industry. But this is a strategic decision for SAIC. At this point, it’s fair to say that SAIC is close to the final call,” a source said.

Two years ago, SAIC could have bought all of the pre-bankruptcy GM for less than the toymaker Hasbro commanded. But it’s probably fiscally and politically more prudent to buy into a washed and rinsed GM with Uncle Sam the biggest shareholder, and creditors holding the bag.

SAIC could pay it out of petty cash. Their October sales are up to 28.8 percent, reports Reuters. This points to an even stronger rebound of the Chinese market that gained strength since August.

“SAIC’s October data is pretty strong and sales may stay solid in November and December as many people might want to take advantage of government policy incentives before they expire at the end of the year,” said Chen Liang, an analyst with Huatai Securities.

In October, SAIC’s JV with GM sold 100,833 vehicles, up 47.2 percent from a year earlier. Their JV with Volkswagen increased October sales by 45.3 percent to 92,100 units. Their own brand sales remain subdued at 11,222 units in October.

For the first three quarters of the year, China’s 16 A-share listed auto companies recorded total net profits of 18.36 billion yuan ($2.76b), up 140 percent, says Capitalvue. SAIC accounted for more than half of the total take, with net profits of 9.58 billion yuan ($1.44b). Inscrutable Chinese stock market: The SAIC share fell 1.17 percent on the news.