Having been asked by a certain newspaper to review the new book “American Wheels, Chinese Roads: The Story of General Motors in China [more info on that review coming soon], I’ve been spending my quiet moments over the last week or so looking into GM’s Chinese operations. The book’s author, Michael Dunne, documents GM’s rise in the Middle Kingdom from the perspective of a well-informed outsider, revealing just how delicate one of GM’s best-performing global maneuvers really was. But after following the rise of GM in China, Dunne notes the December 2009 announcement that GM was selling a 1% stake in its Shanghai-GM (SGM) joint venture to its Chinese partner SAIC (for the paltry sum of $85m no less), arguing that GM had made a dangerous leap of necessity. This sale, implies Dunne, could well have been the tipping point that leads to GM being surpassed by its erstwhile junior (in size, technology and global reach) partner, SAIC. And, in the words of “one GM executive who used to work in China,” GM would need
good luck getting that back.
But, back in June, GM CEO Dan Akerson told GM’s shareholder meeting that he wants to do just that, saying
We have an option to buy that 1 percent. It’s our intention to exercise that.
With Akerson’s announcement, the mystery of GM’s “golden share” sale deepened. At first the question was simply “why would GM sell its 1%?” but now there’s another mystery: why would GM want it back? After some digging, it seems that we are now able to resolve the first mystery, and report why GM sold its one percent. But the whole deal is still surrounded by several layers of mystery which conceal whether GM will in fact be able to regain its 50-50 partnership in SGM, why it would want to and whether its gambit was ultimately worthwhile. And given how important China has been (and continues to be) to GM’s global business, this is definitely an issue that GM- and industry-watchers will want to better understand.