One Percent Of GM China Worth $85m

Edward Niedermeyer
by Edward Niedermeyer
one percent of gm china worth 85m

Fresh details on GM’s Asian wranglings are coming in, and it seems that SAIC paid The General a mere $85m for the one percent needed to control the joint venture. GM’s Nick Reilly tells the New York Times:

the 51 percent stake would give S.A.I.C. the right to approve the venture’s budget, future plans and senior management. But the venture has a cooperative spirit in which S.A.I.C. has already been able to do so… S.A.I.C. wanted to have a majority stake to consolidate the venture in its financial reporting

Which is about as credible as the conclusion that the Shanghai and India deals are going to provide GM International with a meaningful amount of cash with which to rescue its European and Korean divisions. As it turns out, the Indian deal isn’t going to translate into free cash for GM. GM and SAIC will set up a joint Hong Kong-based investment company, which GM will give its Indian operations and SAIC will fund with $300-$530m, bringing its overall value to $650m.

Reilly explains the value of the India venture thusly to the WSJ:

SAIC’s participation helps GM “defray or share large investment” required for the India push and help the partners achieve results faster, Mr. Reilly said in a conference call with reporters. It also allows GM to market more products in India that had not been “envisaged in our GM-only plan,” particularly ultracheap micro minivans and buses that GM makes with two Chinese partners.

But here’s the rub, as explained by Reilly:

The long-term goal of the Hong Kong investment company will be to expand into other emerging markets. But the initial management structure will be in India, while any expansion into other emerging markets would be managed from G.M.’s Asian headquarters in Shanghai

Though this partnership will not be without its value, the idea that this sale will actually help GM International’s cash position is suspect at best. The $85m for the one percent of SAIC is clear cash, but it doesn’t begin to scratch $413m recently spent on Daewoo’s share offering, let alone the estimated $5b needed to restructure Opel.

So what is the real payoff for GM? Possibly a larger stake in GM-Wuling, although Reilly says “we don’t have anything to announce on that, but SAIC has been very supportive in discussions around that.” The only thing looking like a real benefit from this deal is only hinted at by Reilly:

GM also has been “able to achieve some funding for other activities [in China] from the Chinese banking sector, which would have been difficult to do on our own,”

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2 of 8 comments
  • Rusted Source Rusted Source on Dec 04, 2009
    Where’s the surprise knowing it’s on a timer? I was thinking more along the lines of a jack-in-the-box kind of thing - only the government knows when that timer goes off, but the rug pulling happens suddenly all the same.

  • PeteMoran PeteMoran on Dec 04, 2009

    Good God, what a mess.

  • Tassos And all 3 were ordered by Fisker's mother. Seriously, given Fisker's terrible record of Failure in the past, only an utter loser, (for example, VGhost or Art Vandelay?), looking for a BEV terrible enough to be a proper replacement of his 11 mile range Fiat 500E, would order one of these. (apart from Fisker's mother)
  • Tassos And all 3 of them were ordered by Fisker's mother.Seriously, after Fisker's DISMAL record of UTTER FAILURE in the past, only a GOD DAMNED MORON would order this one.
  • RHD Any truth to the unconfirmed rumor that the new, larger model will be called the bZ6X? We could surmise that with a generous back seat it certainly should be!
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  • GregLocock Two adjacent states in Australia have different attitudes to roadworthy inspections. In NSW they are annual. In Victoria they only occur at change of ownership. As you'd expect this leads to many people in Vic keeping their old car.So if the worrywarts are correct Victoria's roads would be full of beaten up cars and so have a high accident rate compared with NSW. Oh well, the stats don't agree.