And so it happened. Xinhua (translation via Gasgoo) has put on the wire that General Mayhem will “transfer half of its Indian operations to SAIC Motor by setting up a 50-50 joint venture there with the Chinese partner.” As expected, “GM and SAIC have also reached an agreement to transfer 1 percent of GM’s stake in their 50-50 Shanghai car venture to SAIC.” With that little percent, SAIC has a controlling majority of the Chinese joint venture. What for?
In return, GM gets what Reuters calls “a timely cash injection.” As suspected by TTAC commentator Pete Moran, the money is most likely being used to fund Opel. GM China would have lost big if Opel would have gone to Magna and the Russians. Many Chinese Buicks are rebadged Opels (Regal/Insignia, Excelle/Astra.)
In India, GM needs help. And SAIC needs help. GM has production capacity of 225,000 units in India. GM sold 65,700 units last year. which works out to a suicidal capacity utilization in India of below 30 percent. SAIC in turn receives what they yearned for: Access to the Indian market. India is paranoid about China invading their country, be it with tanks or with low priced cars. India has so far done everything to keep the Chinese out. GM is giving SAIC a backdoor into India, and 50 percent of their share in the world’s second fastest-growing auto market.
Reuters quotes Qin Xuwen, an analyst with Orient Securities who said “it seems to me that SAIC’s status in the tie-up is obviously rising. The tide has started to turn. They are equal partners now.”
That is the understatement of the day. By giving up control in the world’s biggest and fastest growing market, and by selling half of their share in the world’s second fastest-growing auto market, GM is selling off its future for Chinese cash. They must need the money badly.
Wait! I thought GM had a plan laid out when they didn’t sell Opel.
Sarcasm system now offline.
Bunter
Sarcasm aside, GM/Daewoo just burned through what was left of their remaining credit lines and the restructuring costs for Opel haven’t even begun.
If there is a plan, it is to rush paying back the treasury and launching an IPO. So, the mother ship can retain control of its overseas minions, which is difficult to do under taxpayer ownership.
Bertel hit the nail on directly on its head. They wouldn’t be ceding control to the Chinese unless they really needed the cash. My guess is that Daewoo is close to going belly up.
Well, you aren’t very good at guessing. Don’t go to the Vegas, you may not able to get out with your guessing techniques. This isn’t GM/Daewoo problem. It is a GM’s problem. GM is a loser, and I hate saying it. This is the same company that killed G8. This is the same company that’s building Volt. This is the same company that had Saturn. No more picnic barbeque.
GM had, has, and will have major problems. Daewoo isn’t going to belly up. Daewoo is probably is one of the best asset they have. The Cruze is made by Daewoo. The Cruze would have been made by Daewoo regardless of whether GM existed with Daewoo. If you look at Kia, Hyundai, and Ranault/Samsung, Daewoo would have had a competitive vehicle at that segment. Because Daewoo Nubira (Lacetti) was a competitive vehicle to the Elantra/Spectra/Sephia. The Elantra is a decent car now.
Also, didn’t GM just bought out 20% the Daewoo stakes? Please, check the facts and the history.
It is the Daewoo who is supplying Matiz/Spark ,Orlando/Storm, Excelle/Lacetti/Cruze. Daewoo was doing okay in India.
Daewoo for all intents and purposes is belly up (regardless of what they supply to GM, they can’t compete in thier captive korean market). The G8 was great, but no one bought it. (You are making the B&B fallacy, the cars you long for (RWD, MT6, Diesel, wagon, etc) aren’t the cars that the car buying public, you know the ones that buy millions of cars a year, wants.)
BAIC has been granted a loan of 20 billion Yuan, or about 3 billion dollars. A war chest for buying what companies?
I think TTAC needs to change its name to “This Troupe Adores China!” Sheesh…the first three stories this morning are all about China. Should we all give up our US passports now ahead of the inevitable takeover? A big part of me wishes that we’d get our collective heads out of our asses (looking at you GM) and really buckle down, make the tough decisions and regain some semblance of pride and leadership in the world. Or is that just Friday morning fantasy??
Time zone differences will tend to cluster “breaking news” Chinese stories to the top of the day.
That said, China is worth looking at closely because beyond being the fastest growing car market, and given the current global crunch, they also seem to be some of the few auto companies with actual cash on hand — it’s not much of a leap to expect Chinese auto manufacturers to get vastly more important over the next decade.
GM has a future?
Just read a comment by Nick Reilly, he said as part of the deal (giving SAIC 1%) that the Chinese government has “agreed to certain other aspects” but didn’t give any other details. I bet SAIC is going to buy 49% of Opel.
RNC: Could you please point me to where Reilly said that?
“Reilly said SAIC wanted majority ownership of the China venture so its financial results could be reported as part of SAIC’s earnings. He said GM agreed to that “to get their full cooperation and the full cooperation of the Chinese government in other things,” though gave no details”
http://www.businessweek.com/ap/financialnews/D9CCHBG00.htm
Threeer: When you get up and sit in front of the computer at8:29 am, it’s 9:29 pm here, and my job as overseas editor (who is based in China) is slowly drawing to an end for the day. Tokyo wakes up before Beijing, Beijing wakes up before Berlin, Berlin is 6 hours ahead of the East Coast. If you don’t see a bunch of international stories when you turn on the machine, I haven’t done my job. Ed Niedermeyer is a Westcoastie and he will fill the rest of the day after he has arisen. As far as giving up your US Passport goes: Don’t do it. The Chinese won’t give you one of theirs, and you really don’t want to have one. Makes travel a bit complicated.
keine sorgen…ich bin eigentlich zu frieden mit meiner Pass aus Amerika…bin nur etwas frustriert…:)
Just in case anyone missed Bertel’s reference, this is war he’s talking about:
http://en.wikipedia.org/wiki/Sino-Indian_War
No bondage imagery today? I was rather looking forward to it.
Bondage pics are strictly reserved for French-Japanese tie-ups. The French and the Japanese will know why, the rest doesn’t have the need to know.
2 days ago everyone was wondering when Bertel Schmitt was going to write another installment of his great Autobiography. Now everyone wants to know when the next twisted picture is going to be posted!
That’s rock and roll, baby! :O)
The 51% is the key here. GM is engaging in window dressing by ensuring they no longer need to consolidate the financials of their disastrous Indian venture.
Also, it remains very possible Washington is bribing China to give billions to GM so that Washington can avoid paying the costly political price that would come from shoveling more taxpayer money into the Detroit inferno. If so, the quid pro quo will happen on the side… watch for it. That’s how China will get its money back from this shell game. End result: GM gets money for its foreign operations from the US taxpayer, but gets deniability because it is laundered through China.