GM Officially Out Of Control In China

Everybody who’s ever worked in China knows that some things take some time. Nothing that is announced today, happens tomorrow. There are applications to be made, documents to be “chopped.” Sometimes, this process takes forever, as it seems to be the case with Hummer. Sometimes, things move a bit faster. Last December, we reported that GM would sell a crucial one percent of the 50:50 holdings of GM China to their joint venture partner SAIC to bring the shareholdings to 51 percent SAIC, 49 percent GM.

As China’s new year (that of the tiger) came around, China’s biggest automaker SAIC Motor Corp has won regulatory approval to acquire the crucial 1 percent stake in Shanghai GM, Shanghai Daily reports today via Gasgoo. The matter has been officially filed to the Shanghai Stock Exchange yesterday. It’s official now. General Motors officially has been relegated to minority shareholder in its key venture in the world’s largest auto market. SAIC is now calling the shots.

SAIC makes a charitable donation of $85m for the crucial 1 percent share. According to yesterday’s filing, the added 1 percent enables SAIC to consolidate the joint venture’s results into SAIC’s balance sheet. This makes the bargain price even more astonishing.

When the deal was announced in December, it also became public that SAIC had more or less given SAIC half of GM’s business in India. India is an important growth market. India had successfully kept China out of the country. The deal with GM gave SAIC, and by extension China, backdoor access to a strategically important market.

Again, the price of admission was very low for SAIC. GM basically sold half of their India business for anywhere between $300m to $530, by way of an investment vehicle still to be set up in Hong Kong, which will take over GM India. That money will go right back into the Indian operation, which hadn’t been doing so well.

For chump change, GM is giving up control of a very successful venture in the world’s largest auto market. For a contribution to keep the lights on in India, GM gives SAIC in China coveted access to a country they would not have been able to penetrate alone. While something of great value is practically given away, GM is asking tax payers in the U.S.A. and Europe for money to keep them afloat. Why aren’t they ask China for money for something China urgently needs and wants? What’s going on here?