GM Buying Into Chinese Venture… But With What?

gm buying into chinese venture 8230 but with what

Dig through the dire news about GM floating around this morning’s autoblogosphere, and you just might notice a story that doesn’t quite jive with all the doom and gloom. Bloomberg reports that GM is “in talks with a local partners” to increase its 34 percent stake in GM-SAIC-Wuling, a Chinese light-truck and van maker. As our man in Beijing reports, China is aggressively stimulating its car market (which has bottomed out, by Chinese standards, at 11 percent growth) and GM wants in on the action. Of course there are just a few issues with the move– beyond the fact that GM has no cash with which to make such a deal. SAIC currently owns 50.1 percent of the consortium, and its Chairman Hu Maoyuan tells Bloomberg that it won’t be giving up its majority. “GM and our partner in Guangxi (Wuling) are still discussing how to settle the share transfer,” says Hu. So GM wants to spend cash it doesn’t have to increase a non-majority stake in an overseas joint venture. Non-starter, right? Not according to Ricon Xia, an analyst with Daiwa Associate Holdings…

Xia figures that GM’s “government first, market second” approach actually has a shot at succeeding in China. “Given the lobbying power of both SAIC and GM, the American carmaker will sooner or later get more shares. This venture is a vital part of GM’s China operation.” And why would China’s government lift a finger to help GM out, regardless of GM’s lobbying prowess? “The current financial situation may actually help GM push forward the deal,” according to Xia. “Especially given the Chinese government’s willingness to help the U.S. fend off the financial crisis that has also hit GM heavily.” As touching as it is to hear that the Chinese want do their part for our flagging economy, GM’s lack of cash seems like the real issue here. Besides, why would American politicians continue to push for a domestic bailout when GM is slashing all things American to up its investments in China? Go figure.

Join the conversation
2 of 15 comments
  • MMH MMH on Nov 10, 2008

    @ autonut: A 0% IRR is better for GM than either a negative IRR (investments in US enterprises) or having a Ch11 court simply yank the money. I'm certainly not a bankruptcy expert, but would the Russian and Chinese ventures act as capital shields in the event of Ch11?

  • Bertel Schmitt Bertel Schmitt on Nov 10, 2008

    Iran Contra? Now there's an idea. According to publicly available info, the US-Israel-Iran dealings were a red herring, distracting from the REAL money flow. Planes flew to Nicaragua with arms, came back with drugs. Someone else spin the rest of the story ....

  • Dave M. I will say this generation styling has grown on me; previously I thought the Fiat version was far better looking. Miatas have always been pure joy to drive.
  • Kendahl A Tesla feature has been free, periodic, over-the-air, software updates that add new features or improve existing ones. Owners brag that their x-year-old car is better today, because of the updates, than it was brand new. Will Tesla start charging for these updates after a few years? Teslas hold their value very well. I suspect losing free updates will do serious damage to that.
  • BklynPete When I was a kid, the joke about Nissan choosing the name Datsun goes like this:Nissan execs were uncomfortable with the World War 2 connotations of their name in the North American market. Seeing how successful VW was over here, they went to VW's most-recent German ad agency. The Japanese told the Germans they needed a new name. The Germans agreed. They asked the Nissan execs when they wanted a review of potential names. The execs said two weeks. The German ad people said, "dat soon?"I will be crucified.
  • Kendahl Modern cars are better mechanically in every way compared to cars from the 1960s. But, and my age is probably showing here, the older ones are prettier.
  • Master Baiter I like the references to Red Barchetta. My fun car is a spiritual cousin to this Miata: 2001 BMW M Roadster--green with tan leather; five speed.