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 GM's India operations. In exchange, the General would receive what amounts to about 20% 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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