GM Out Of Control In China, India

Bertel Schmitt
by Bertel Schmitt
gm out of control in china india

China and the world are waiting for a press conference to be held at 5pm local time (0900 zulu,) for which GM is promising “some important GM news,” relating to SAIC, says Reuters. Nick Reilly will take time off from restructuring Opel, and will personally host the conference.

It is widely expected that GM will cede control of the 50:50 China joint venture by selling 1 percent to SAIC. They will also most likely announce that GM will transfer half of GM’s India operations to the Chinese company.

According to Gasgoo’s sources, SAIC will have “a controlling stake in GM’s flagship venture in its fastest-growing market. However, GM would retain equal voting rights in company decisions. SAIC could pay up to 20 percent of the joint venture value to take control, while GM would have the option of buying back the stake later at a premium.”

GM is now mortgaging its second-most important market, China. By the looks of it, China will soon buy more GM vehicles than the USA.

India is (rightly or wrongly) seen as the “next China” as far as growth markets go, and auto manufacturers are falling over themselves carving out a share of the pie. GM doesn’t have much of a share. India is owned by Suzuki. In August of this year, GM had abandoned plans to get 10 percent market share in India by 2010, because “the economic downturn has forced us to go for a change of plans. We are now re-scheduling the target till 2011.” In 2008, the Indian automobile industry ranked as the ninth largest in the world with an annual production of over 2.3 million units. With more than 1.15b people, India is the second most populous nation on the planet, behind China. By handing a large chunk of its (future) Indian business to China’s SAIC, GM is admitting defeat, or is minimizing its potential in one of the world’s few growth markets, or is admitting that they don’t have the money to develop that market, or all of the above.

What’s more, SAIC is flexing its muscles. It’s telling its weakened partner who’s really boss on this side of the globe.

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  • Bunter1 Bunter1 on Dec 04, 2009

    And if (when?) things continue to slide in Yurp and NA does the strong partner continue to gobble up little (big?) pieces of the former empire? One wonders how the "patiotic" fans of GM might react if the corporation was Chinese controlled. Bunter

  • Rnc Rnc on Dec 04, 2009

    My question is - The JV's are not allowed to export from China (domestic only), does SAIC owning 51% change the way the entity is recognized and allow for exports? And yes SAIC is paying quite a lot for thier 1%, the money is for Opel and Daewoo (would you rather finance yourself or have multiple government hands holding the wheel along with you, think they have already learned that lesson from the German government)

    • Bertel Schmitt Bertel Schmitt on Dec 04, 2009

      rnc: Where did you read that JV's are only allowed to export if the Chinese hold more than 51%? AFAIK, this has nothing to do with it. The "no export" clause (without the other side agreeing to it) is usually part of the contract between the two JV partners. It protects the foreign JV partner from a flood of their own cars made abroad. The Chinese government would be overjoyed if there would be more exports, even if the JV partner would hold only 1%. I know from my buddies at VW that there are small scale trial exports (to Australia, Northern Africa) happening, and they sure don't have a problem with that alleged clause.

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