By on June 29, 2010

Either CNN Money’s Chris Isidore just rained all over GM’s IPO parade with his headline The auto rebound is a myth, or GM’s IPO is going to need a lot of support from abroad. With GM planning on dropping billions of dollars worth of stock on the market, investors interested in supporting US-market growth have quite a bit of cold water to deal with. Isidore’s piece is a good place to start. As has been the case for some time, GM’s real growth opportunities appear to be in developing economies like the so-called BRIC (Brazil, Russia, India, China) countries. The Chinese are notoriously cash-rich, and hold a special affection for General Motors which is the second-largest foreign automaker in China. And with Chinese sales outstripping America’s sluggish sales, China is already GM’s most important market. GM’s Chinese partner SAIC recently took a majority stake in their “Shanghai GM” joint venture and was given the keys to GM’s Indian market operations for its trouble. Why wouldn’t Chinese firms like SAIC move on a chunk of GM’s equity when it goes to market? Given how perennially popular US sovereign debt has been with Chinese investors, why wouldn’t a Chinese corporation love to become business partners with the United States government? But how would Treasury react? Would the White House rather hold onto GM than let Chinese investors take it piece by piece? Or is this all just too terribly paranoid to consider?

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14 Comments on “Ask The Best And Brightest: Will Chinese Firms Back GM’s IPO?...”


  • avatar
    carguy

    GM maybe optimistic to extrapolate the Chinese rate of growth too far into the future but I’m sure that there will be Chinese investors who share their enthusiasm.

    • 0 avatar
      Some Guy

      People bash GM for being owned by the U.S. Government.

      The U.S. Government sells their GM shares to the Chinese.

      GM flourishes.

      The Chinese benefit.

      Wasn’t it a great idea to sell and benefit those overseas?

  • avatar
    thebeelzebubtrigger

    Doesn’t matter either way, it’s a house of cards and it will fall sooner or later.

  • avatar

    stateside, GM has moved mountains within their organization, to the point that their biggest obstacles are no longer internal. however, they now face external double trouble, namely Mullaly and a resurgent Toyota.

    beyond that looms additional US capacity coming online from various manufacturers. also, the Chinese and Indians will arrive before long, and something tells me to watch out for VW if they are able to attract the American public.

  • avatar
    Stingray

    The chinese will end owning it. Sadly.

    • 0 avatar
      jacksonbart

      and the US if they bail out social security as there are not enough US Millionares and Billonares that be be robbed to do so for the overspending in the past 40 years.

    • 0 avatar

      I wonder if that’s not a preferred option to the US government owning it, and I’m not just saying that to be snarky.

      Nevermind the supposed loss of “intellectual property” and an “industrial base.” We’ve already squandered those things anyway. And for many, many consumers, any American pride in GM has been lost thanks to the past 30+ years of product mediocrity.

      Besides, we’d still have Ford (and their plants in Mexico… like I said, our industrial base is already gone.)

      Let the ChiComs deal with the mess that is GM.

  • avatar
    mtypex

    Does the Buick Regal in China have Xenon headlamps? (The horse is dead but I like the smell of glue.)

    If GM falls behind the competition, the Chinese can and will buy other automakers’ products. The last forecast I worked on for China in 2020 called for ~30 million industrywide sales.

    I can’t tell you what went in the model, but there was more crap in there than tortilla soup. Just because the industry grows does not mean any one automaker will benefit from the upward trend.

  • avatar
    Steven02

    I think firms world wide will back GM’s IPO. My question is, when does the US gov’t sell of its final shares? Or does it not in hopes of getting some nice dividends. Who knows.

  • avatar

    I wasn’t tops in my economics class but I’d say GM needs two things to survive. 1. Better dependability so as not to have any ticking time bombs in the recall closet, a very important thing in this new age of “public” recalls. In the future more so than now, nobody is going to buy a new GM (or any other make) if there are a few videos on Youtube of bad steering, trucks burning etc. with hundreds of nasty comments along with them.

    2. There is tremendous over capacity of vehicle production worldwide and all other nations intend on getting their slice of the pie. Even if America put up more barriers to importing it wouldn’t matter since there is already over capacity here and the others would just come and set up shop here anyway. So the second thing GM needs to do to survive is stick to number 1. – better dependability – out engineer them. Why would the Chinese or anyone else buy into a dying competitor if you could just take their customers for free after the funeral? They need the technology? patents? – just buy them at the bankruptcy auction.

  • avatar
    Dimwit

    The key question is what the government wants. Not the US but China. As we’ve seen in the last few years, if the gov’t doesn’t like the idea, it ain’t gonna happen. Hummer anyone? Bertel probably needs to chime in here, but just because there’s money out there they may look for more about attitudes, particularly Washington’s and put the kibosh on any substantial stakes taken in the IPO.

  • avatar
    Norma

    Interested in the China market? There’re SAIC (Shanghai Auto, not the U.S. defense co.), Guangzhou Automobile, FAW that’ll give you all the exposure you need (and its associated risks).
    Why invest in an old company still burdened with a combative UAW(will they strike or not is always an unquantifiable risk), high cost and still blood-letting Opel division? And can anyone tell me how much of the ‘new’ GM’s profit is still coming from the N. America market?

  • avatar
    Tosh

    Why are Australia and New Zealand considered ’emerging markets’?

  • avatar

    The way this administration has been shoveling public money into SEIU, maybe they’ll pick up a few percent.

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