China Watch : Chairman Hu Maoyuan says SAIC Motor may take GM stake

Automotive News Europe, 21st September, 2010

SHANGHAI (Bloomberg) – SAIC Motor Corp. said it may invest in the initial public offering of partner General Motors Co., cementing ties between the biggest U.S. and Chinese automakers.

China’s largest carmaker will consider investing in GM if “conditions are favorable,” Chairman Hu Maoyuan said in Shanghai yesterday. The company hasn’t yet made a decision whether to make the investment and is waiting for the details of the share sale, he said.

The automakers, which have made cars together in China for more than a decade, said in December they would also sell low- cost vehicles in India. GM filed for an IPO in August as the U.S. Government seeks to pare the 61 percent stake it gained in the company through its bankruptcy and $50 billion taxpayer bailout last year.

GM is our important strategic partner. We are not clear about the details of its IPO. We will make the right decision once we know details.” Hu Maoyuan, Chairman, SAIC Motor Corporation Limited

“GM is our important strategic partner,” Hu said. “We are not clear about the details of its IPO. We will make the right decision once we know details.”

SAIC Motor’s Shanghai-listed shares rose as much as 3.4 percent today to 17.52 yuan and changed hands for 17.41 yuan as of 10:51 a.m. The benchmark Shanghai Composite Index gained 0.1 percent.

The joint venture partners are developing a new engine and transmission system together, have launched a new car brand Baojun in the Chinese market and have formed an alliance to sell low-cost cars in India.

Perfect Sense

“Politics and government relationship aside, it makes perfect sense,” said Bill Russo, Beijing-based Senior Adviser at Booz & Co. “Why can’t there be a China-America alliance? Fear of China is the only reason.”

GM’s initial public offering will be open to overseas investors, the U.S. Treasury said in a statement on its website. Retail and institutional investors will be offered shares, and the Treasury “will not involve itself in decisions regarding allocation of shares to specific buyers,” the department said.

GM “cannot comment on speculation surrounding a public offering,” Shanghai-based spokesman Mike Albano said in an e-mailed statement on Sept. 18.

China Ventures

The Detroit-based automaker, whose partners in China also include Wuling Motors Co. and China FAW Group Corp., sold 1.2 million vehicles in the nation during the six months ended June 30, according to a company filing related to the IPO. Combined income from the joint ventures with SAIC Motor and Wuling rose to $734 million in the first six months of the year from $298 million a year earlier.

“It’s not a bad idea for GM and SAIC Motor to further their ties if it means getting GM better ingrained in the Chinese market,” Aaron Bragman, an analyst with IHS Automotive in Northville, Michigan, said in a telephone interview. “That’s where the money is going to be made for the industry.”

It’s not a bad idea for GM and SAIC Motor to further their ties if it means getting GM better ingrained in the Chinese market.That’s where the money is going to be made for the industry.” Aaron Bragman, Analyst, IHS Automotive

China’s wholesale deliveries of passenger cars increased 18.7 percent to 1.02 million units in August, compared with 13.6 percent growth in July, the China Association of Automobile Manufacturers said in an e-mailed statement on Sept. 9.

Sales in markets such as China and India are helping offset slumping demand in the U.S. and Europe. China, which overtook the U.S. as the world’s largest auto market last year, may sell 16 million vehicles this year, the association said last month, boosting its forecast from a previous estimate of 15 million.

In Great Shape

GM, whose sales in China rose 19.2 percent from a year earlier to 181,625 vehicles last month, is counting on emerging markets including China to bolster profit as it prepares for what may be the second-largest initial public offering in U.S. history.

The carmaker is “in great shape” to hold an offering, United Auto Workers President Bob King said in a Bloomberg Television interview.

“It will actually help them sell more product when they’ve done the IPO,” King said. “I think the American public will see that they’re a strong and healthy company.”

It will actually help them sell more product when they’ve done the IPO. I think the American public will see that they’re a strong and healthy company.” Bob King, President, United Auto Workers union

GM, China’s largest foreign carmaker, makes vehicles including Buick Excelle and Regal cars as well as Chevrolet Lova compacts with its Chinese joint-venture partner SAIC Motor Co. It also makes Sunshine minivans at SAIC-GM-Wuling Automotive Co., a venture with SAIC in which it owns 34 percent.

The two partners plan to introduce the Chevrolet Volt in China next year, the U.S. carmaker said in a statement on July 27, as part of a plan to sell “several” hybrid and electric vehicles in the coming months.

In December, GM and SAIC signed an agreement to invest $650 million to form an equally-controlled venture to sell cars in India. The American automaker plans to spend $250 million in introducing five SAIC models in Asia’s second most populous nation, Karl Slym, President of GM’s Indian unit said in July.

[Source: Automotive News Europe/Bloomberg]

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Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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