China Watch : SAIC Motor ‘close’ to a decision on GM IPO stake

Automotive News Europe/Reuters, 3rd November, 2010

BEIJING (Reuters) – Top Chinese automaker SAIC Motor Corp. is close to making a decision on whether to buy a stake in longtime partner General Motors Co. as the U.S. auto firm goes public, sources with knowledge of the matter said on Wednesday.

SAIC Motor, which operates manufacturing ventures with GM and Volkswagen AG, has been exploring the prospect of taking a stake in the Detroit automaker’s more than $13 billion share sale. SAIC Motor Chairman Hu Maoyuan had admitted publicly that he would not rule out such a possibility.

“GM and SAIC is the most successful partnership in the Chinese auto industry. But this is a strategic decision for SAIC. At this point, it’s fair to say that SAIC is close to the final call,” a source told Reuters.

GM, which emerged from bankruptcy in July 2009, is likely to sell a combined $1.5 billion to $2 billion stake to four or five sovereign wealth funds, sources said.  The IPO has been closely watched due to its scale and the involvement of the US Government, which is looking to the landmark stock offering to reduce its nearly 61 percent stake in the automaker. However, GM and SAIC Motor executives in China declined to comment on issues related with the IPO.

They are good partners and funding is never an issue for cash-rich SAIC. It seems to me that an equity tie is highly likely.” Sheng Ye, Associate Research Director, Ipsos’ Greater China region

China, which overtook the United States as the world’s biggest auto market last year, has been a major bright spot as the global industry struggles to recover from a steep downturn. The country is now GM’s biggest market, where it sells locally made Chevrolet, Buick and Cadillac models. Wuling-brand minivans and pickup trucks manufactured at its tie-up with SAIC give the U.S. automaker access to the country’s fast-expanding minivehicle market.

The partners had teamed up earlier to tap the India market, a mutually beneficial move, which is expanding GM’s foothold in Asia and giving SAIC access to another fast-growing major market.

“They are good partners and funding is never an issue for cash-rich SAIC. It seems to me that an equity tie is highly likely,” said Sheng Ye, associate research director at industry consultancy Ipsos’ Greater China region.

SAIC Motor’s third-quarter net profit jumped 47 percent to 3.71 billion yuan ($556.2 million) thanks in part to strong sales of cars made with GM and VW.

[Source: Automotive News Europe/Reuters]

Clive Goldthorp

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