GM Wants Bigger Stake in Joint Venture
China is GM's Golden Child. The General currently holds 34 percent of a ménage à trois with SIAC Motor Corp and Liuzhou Wuling Automobile. Reuters reports that according to the Shanghai Securities News, GM is in talks with SAIC (which holds 50.1 percent of their joint venture) about increasing their stake. The paper didn't say how much more GM wanted; GM's chief in China, Kevin Wale said they were "weighing their options." This deal would certainly bolster GM's bottom line and help cover their North American losses. However, SAIC builds cars under their own name. They are also GM's direct competitors in China, and they've publicly stated they want to expand their lineup. So how receptive they'll be to The General's entreaties is yet to be determined.
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@ rodster205: why would China do that? Countries act (or try to act) in their own interest. China will make every effort to maximize their gains economically, without changing status quo relationships. So far things are working in their favour, but it isn't clear how they would continue to progress without trading partners. Rather than abandon US automakers, China is likely to (attempt to) take a stake in them. As a free trading nation, by the time US shuts boarders to Chinese goods (ie a high tariff wall), a distinct possibility in a protracted downturn, the rest of the world will have already shut their doors to China. I suspect China will increasingly play by the rules, in order to maintain the advantages they have already achieved. Also to maintain global economic stability. Any meltdown in the US looks to be the result of made in USA political, economic, and business decisions. These are sad times.
Why would they bite the hand that feeds them? Dominance, that's why. Dominance is definitely in a Communist dictator's interest. I'm not saying they would do it long term, but if they did for 6 or 12 months can you imagine the havoc that would cause? And all long term projections I have seen put China as the largest market in the future, not the U.S. In a few years they won't need to sell anything to us. It would take a while to get production of all the "crap" going in other countries. In the mean time the hits to our production (need those Chinese made parts), and commerce with the already weakening economy would push us over the edge. Would it have a big, bad impact on the people of China? Sure. Does it's Communist government give a rip about the people? Nope. If it was a temporary export halt they would just let the people suffer through it and say it was for the good of China. Remember that all this new "openness" came about because their Communist government was on the verge of collapse just like the Russians and they smartly decided to open things up some just to survive. It is still nowhere near a free market there, much less a free society. I'm not saying I know this will happen. I'm just an idiot sitting in a cube, what do I know. But as a worst-case scenario this could be really bad and I think way too much trust has been put in Communist dictators to do the right thing with our investments.
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I'm with Raskolnikov. We should help out our fellow Americans by buying more goods made in Mexico, Brazil and Canada.