• Dec 4, 2009
It has been a busy week at General Motors. The week started off with CEO Fritz Henderson's abrupt resignation, then executives converged on the LA Auto Show where Bob Lutz was the keynote speaker and then the U.S. market Chevy Cruze was revealed. Now, the General is reportedly deep in negotiations halfway around the world with its Chinese partner, SAIC, to sell its partnership stake in what is now the largest auto market in the world.
Here is how the deal will reportedly break down: According to Reuters, GM will give SAIC a scant one percent of its interest in the China venture and 50 of the value of the China venture. Sounds like a pretty sweet deal considering the fact that GM isn't exactly a big player in the Indian market – but there is a very big downside. If GM cedes one percent of its joint venture with SAIC, then the Detroit, MI-based automaker would no longer control its China operations. The rumored deal will contain a proviso that the General can later buy back its lost percentage for a "premium price." That sounds a little like GM just got a loan from SAIC and put up one percent of its ownership as collateral.

While GM currently has over $40 billion in its cash coffers courtesy of its recent bailout and bankruptcy, The General is in a big hurry to pay back the money it owes the government. It also has to contend with what is still a very soft auto market – not to mention Opel restructuring costs that could tally $5 billion or more. But China is also a monster part of GM's business plan, so any money gained from this deal could come at an even greater cost. We have to wonder if this deal had anything to do with Mr. Henderson's abrupt exit stage left...

[Source: Reuters]


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  • 31 Comments
      • 5 Years Ago
      This sounds like a bad, bad deal.

      Mortgaging the future to pay for today. Ugh.

      GM is (or at least could be) a big player in the largest automarket in the world - and one that is still actually growing.
        • 5 Years Ago
        @SU

        Whatever. They are doing it to pay the US back as quickly as possible because they are tired of people like you and all your BS about them stealing your money. So who cares if you think they are making a bad decision, you'll be getting your loan money back post haste. So stop bitchin.
        • 5 Years Ago
        @ Tourian

        They raise the perception of buyers by designing, engineering and building BETTER CARS, not trying to appease the idiots that have a "grudge" against them because they took government loans.

        God forbid we keep one of the largest US companies and one of the largest employers in business during the worst recession in decades just because some fools can't think past next week or next month. If they indeed made this pact with China, simply to repay some loans early, while at the same time potentially cutting themselves out of the largest and fastest growning auto market (China's), then they might have just signed their own death sentence.

        Every other company (car-related or otherwise) is scrambling to get a foothold into the Chinese and Indian markets (2 of the very few actually growing), and GM which had established a presence might have just lost control of it.

        The short-sightedness and ignorance of some people is astonishing, to the point where they are willing to sell our future away for some petty payback.
        • 5 Years Ago
        OT: GM has a HUGE management shakeup, Lutz is probably not fired but is moved.
        • 5 Years Ago
        @Hazdaz

        Ha ha, dillhole. Cute. Actually, hurrying to pay back a loan to possibly placate the buying public in YOUR BIGGEST MARKET is EXACTLY what they should be doing. The sooner they can raise market perception of their company in THE EYES OF AMERICANS the better. Risky? Maybe. Necessary? Absolutely! So its most likely your urging for them to be cautious are going to be ignored. And rightfully so.
        • 5 Years Ago
        GM sold its Chinese and Indian assets to save Daewoo.

        Unlike GM's other foreign subsidiaries, Korean government actually wants to take Daewoo back from GM's hand via forced bankruptcy and form the second world-class automaker like Hyundai-Kia on top of Daewoo's assets. Accordingly no local government bailout can be expected for Daewoo, GM must raise the bailout fund itself.

        The only liquid asset GM has at the moment are GM China and GM India, so GM sold those to save Daewoo. So why would GM go through such an extreme measure to save Daewoo? The same reason GM's holding onto Opel in spite of German objection; Daewoo is the engineering center of all future Chevrolet passenger cars and GM needs Daewoo to develop new product.
        • 5 Years Ago
        I usually agree with Tourian but I do have to side with hazdaz on this one at least for the reasoning and the possibility that this is not the best course of action.
        • 5 Years Ago
        "Mortgaging the future to pay for today. Ugh."

        sounds like more gov't wranglings. bankrupt tomorrow for very little return today.

        and Rattner wanted to get rid of Henderson from the get go but didnt think he could find anyone to swoop in and fix it.

        • 5 Years Ago
        @ Turian

        I don't think rushing to payback loans is a good idea when the company (and the economy) is as weak as it is. So again, dillhole, I say you get your facts straight before you try to start trouble. Some of us realize how important GM is to the US economy and paying back loans 6 months or a year later than expected is more important, than trying to rush to repay loans that will end up possibly crippling the company in the future.
        • 5 Years Ago
        @Hazdaz

        You're not my buddy. You are complaining about decision making that the article suggests it to hurry up and pay back loans. It is very simple.
        • 5 Years Ago
        > This sounds like a bad, bad deal.

        GM did this to save Daewoo, where all future Chevrolet passenger cars are planned to be developed at.

        Korean government is trying to bankrupt Daewoo to take it back from GM and build the second world class automaker in addition to Hyundai-Kia over its assets, and GM desperately needs Daewoo as its passenger car engineering center, because Daewoo could engineer cars at less than half the cost and time of GM's US engineering center.

        Unlike elsewhere, GM cannot expect local government's bailtout with Daewoo, so it must bail out Daewoo itself. The only source of liquid-asset GM had was GM China and GM India, so GM sold those to bail out Daewoo.
        • 5 Years Ago
        @Tourian.

        What the hell are you talking about?

        If you are indeed saying that I am bitching about GM taking money, then you better get your facts straight there buddy. It's not like I "wanted" GM to get bailout money, but I do realize that they were LOANS (and not "free cash" like some idiots though), and they were a very necessary thing to keep them alive and keep this Great Recession from turning into Depression 2.0.
      • 5 Years Ago
      Interesting, Holden is road-testing Daewoo LaCrosse in Australia.

      http://www.caradvice.com.au/50084/holden-testing-daewoo-lacrosse-for-australian-market/

      Daewoo is the source of GM product for Chinese, Indian, Australian and European Chevrolet markets. Loss of Daewoo to Korean government would cripple GM's product development capability, so Daewoo must be kept at all cost, even if it means conceding control of GM China to SAIC.
      • 5 Years Ago
      Cash for Control program, GM will be forced to eventually poor silicate down the tubes at the RenCen in Detroit and shift all real management control to China if they do this type of cash infusion. Short term gain, long term China.
      • 5 Years Ago
      Wow same thing is going to happen with GM that has happened with Sangyoung in Korea. SAIC is just a corrupt company, and I know that GM is going through some hard times but doing business with a company that is known to break the laws just to gain extra information is just wrong. GM is living on the U.S citizens money, so we the people should have a say in what they do with our money.

      Even though GM is the biggest American company, soon SAIC or other companies would swoop in and eat away GM if they keep making these bad decisions.
      (I might be wrong, but its just my opinion)
      • 5 Years Ago
      Maybe I missed something but they are selling 1% with an option to buy it back. Sounds to me like a win.
      • 5 Years Ago
      We shouldn't be doing business with communists.
      • 5 Years Ago
      they don't like imitation.
      so they sell us the bad st*ff and get rich.

      the bl*me is on Richard Nixon.
      • 5 Years Ago
      Its going to tough for SAIC to sell their wares in India. With lots of established local, Japanese, Korean and European brands they lots of good luck.

      Chinese products are carry a stigma of poor quality in India and to overcome it is going to be hard.

      Has anyone seen the Wuling line which they plan to sell in India? LOL
      • 5 Years Ago
      Why is the writing so silly and clicheed in this blog? What is this constant repetition of "the General" when referring to the General Motors Corporation and "the Blue Oval" for Ford Motor Company? If it were once or twice it wouldn't be so bad. But it is a constant, boring repetition. Shows a lack of talent in writing. Don't want to say General Motors Corporation then say GM and if you want to show you are "in the know," and are one of the insiders, they drop a "General" from time to time. But all the time?
      • 5 Years Ago
      Everyone will lose their control of their Chinese operations at some point.

      Or, once outright Chinese companies have gained all the knowledge, technology, and expertise they need, the Chinese will start buying their cars exclusively.

      Just look at how it went down in Japan so many years ago.
        • 5 Years Ago
        test 1 2 3
        • 5 Years Ago
        You don't understand the behavior of Chinese consumers that prefer foreign brand cars at premium as they get wealthy and driving a Chinese brand car is considered a shame.

        Foreigners are too entranced into Chinese domestic market for Chinese domestic brands to prosper.

        In other word, China isn't going to be Japan and Korea, whose local market is 95% controlled by local brands, because China lost its domestic market to foreign brands.

      • 5 Years Ago
      Government Motors is giving up its operations in the most important car market in the world--China. What a boneheaded move!
        • 5 Years Ago
        FAIL

        Read the article. GM is giving up 1% point of its stake in SAIC.
      • 5 Years Ago
      You never control your China operations, by Chinese law. All foreign joint-venture operations that operate in China must be at least 50% Chinese-owned and so you're at best an equal partner no matter what you do.

      The WSJ puts it a little differently:

      'GM, Shanghai Automotive To Develop Commercial Vehicles In India'

      http://online.wsj.com/article/BT-CO-20091204-702381.html

      Basically, GM India becomes co-owned by SAIC, thus giving them a chance to sell Chinese vehicles into the Indian market. Which makes a ton of sense, if you are going to sell cars in India, you're going to want to sell very cheap cars, like SAIC produces.
        • 5 Years Ago
        And how they're a member of the WTO and get away with this is beyond me.

        And how we sit back, spread our legs and let these foreign countries rape our market, while we're content to let them sit closed, is also beyond me.
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