China's SAIC To Buy Buick For Bupkis

According to Reuters, GM “is in intense and earnest preparations for a possible bankruptcy filing.” Meanwhile, GM’s joint venture partner in China, SAIC, is making preparations of its own. They might just buy Buick before it goes to hell in the GM hand basket. The matter has received added urgency by a note from Moody’s Investor Service that the agency reckons there’s a 70 percent risk of bankruptcy for Detroit’s three automakers given the difficulty of restructuring out of court.

According to the Shanghai Securities News via Gasgoo, GM’s Chinese joint venture partner SAIC is planning to buy the Buick brand from GM, or, at the very least, take over the rights to use the Buick brand in China. The Chinese have a weary, wary eye on the Presidential Task Force on Automobiles (PTFOA) which may just order GM to reduce the number of its brands to three. Given the dismal sales record of Buick in the U.S., the Chinese are rightly worried that Buick may not be amongst the chosen few. A government-to-government wink lies well within the realm of the possible.

In China, Buick is enjoying healthy sales, although Buick has seen better times there as well. Worldwide, China is the biggest market for Buick, a market SAIC doesn’t want to lose. It is unlikely that there are any other serious bidders for Buick, so SAIC could pick up Buick for bupkis.

GM’s first-quarter sales in its Chinese passenger car venture slid 9 percent from a year earlier. This is especially embarrassing as Hyundai’s Kia boosted its sales by 39.9 percent during the same period in China. Sales of Shanghai GM fell 7 percent last year, while China’s overall vehicle sales gained 6.7 percent, the slowest pace in a decade.

Putting a positive spin on the shocking news, Shanghai GM said its first-quarter sales grew 12.9 percent from the fourth quarter last year, benefiting from new Buicks. It launched a remodeled Buick Regal and the new Buick Enclave sport utility vehicle at the end of last year as part of its efforts to restructure a product line-up that’s long in the tooth and losing market share.

Shanghai GM said its business had not been affected despite the Obama administration’s rejection of GM’s bailout plan and the possible dire consequences. In a way, it might be true. SAIC’s bargaining position has vastly improved.