Dig through the dire news about GM floating around this morning’s autoblogosphere, and you just might notice a story that doesn’t quite jive with all the doom and gloom. Bloomberg reports that GM is “in talks with a local partners” to increase its 34 percent stake in GM-SAIC-Wuling, a Chinese light-truck and van maker. As our man in Beijing reports, China is aggressively stimulating its car market (which has bottomed out, by Chinese standards, at 11 percent growth) and GM wants in on the action. Of course there are just a few issues with the move– beyond the fact that GM has no cash with which to make such a deal. SAIC currently owns 50.1 percent of the consortium, and its Chairman Hu Maoyuan tells Bloomberg that it won’t be giving up its majority. “GM and our partner in Guangxi (Wuling) are still discussing how to settle the share transfer,” says Hu. So GM wants to spend cash it doesn’t have to increase a non-majority stake in an overseas joint venture. Non-starter, right? Not according to Ricon Xia, an analyst with Daiwa Associate Holdings…
Xia figures that GM’s “government first, market second” approach actually has a shot at succeeding in China. “Given the lobbying power of both SAIC and GM, the American carmaker will sooner or later get more shares. This venture is a vital part of GM’s China operation.” And why would China’s government lift a finger to help GM out, regardless of GM’s lobbying prowess? “The current financial situation may actually help GM push forward the deal,” according to Xia. “Especially given the Chinese government’s willingness to help the U.S. fend off the financial crisis that has also hit GM heavily.” As touching as it is to hear that the Chinese want do their part for our flagging economy, GM’s lack of cash seems like the real issue here. Besides, why would American politicians continue to push for a domestic bailout when GM is slashing all things American to up its investments in China? Go figure.
Your tax dollars at work, folks!
The Walmart Effect hits GM.
Seeing that GM has no available Cash, they go to the Government claiming they are in dire straits, Obama give them Money, your Tax dollars, they buy into China and recently they opened a new Factory in Russia and so it goes eh!
C’est la guerre.
A JV with a Chinese maker is challenging enough (especially when they consort with bitter enemies at the same time.) To survive in a menace a trois with TWO Chinese companies, is, well, interesting. So no wonder GM wants Wuling out. But they won’t go. Unless paid-off royally. And as you correctly point out, GM doesn’t have the dough. Share transfer? Deutsche Bank just put GM’s price target at zero.
I TOLD you they play fast and loose with the rules…especially about money.
But seriously, is this ‘GM’ buying into GM-SAIC-Wuling or is this ‘GM-SAIC-PATAC’ buying into them? I think the Chinese ‘Division’ of GM is technically ‘owned’ by a joint venture with GM and SAIC with SAIC being the 51% owner?!? I could be wrong but it’s not hard for me to imagine someone at Bloomberg not realizing that GM-China is a joint venture and just asuuuuuuuuming that it’s ‘GM’…Maybe? Maybe not?
@Robert Fargo
“C’est la guerre” this morbid fascination with everything French that led us to current state of affairs :) .
Perhaps I am not the brightest tool in the shed, but why would anyone invest in a country, which laws are prohibiting to take any profits outside of the country? The most one can legally take out of China is the value of original investment, but not a cent (yuan) of profit from such investment.
@autonut: You are plain wrong. Period. These are stories from the bad old days. Times and rules have changed. I brought this up a while ago. Google WFOE.
Bertel Schmitt: “To survive in a menace a trois…”
Ha! You are definitely a TTAC-grade writer.
“Deutsche Bank just put GM’s price target at zero.”
Finally, a specific, measurable goal for GM. And one that I’m willing to bet the leadership will deliver on.
Does anyone recall Iran-contra scandal of the mid 1980’s? I would not be surprised if an Oliver North “neat idea” is about to occur.
+1 on the “menace a trois” kudos!
Menace a trois.
I stole it: http://www.guardian.co.uk/film/2002/may/17/artsfeatures1
Does anyone recall Iran-contra scandal of the mid 1980’s? I would not be surprised if an Oliver North “neat idea” is about to occur.
Hmmm… GM Stock for rocket launchers?
Nah… I think Wagoner will go DeLorean on us ….pretty soon a hidden camera Youtube vid will surface. (…and JD was a GM guy back in the day.)
@ autonut:
A 0% IRR is better for GM than either a negative IRR (investments in US enterprises) or having a Ch11 court simply yank the money. I’m certainly not a bankruptcy expert, but would the Russian and Chinese ventures act as capital shields in the event of Ch11?
Iran Contra? Now there’s an idea. According to publicly available info, the US-Israel-Iran dealings were a red herring, distracting from the REAL money flow. Planes flew to Nicaragua with arms, came back with drugs.
Someone else spin the rest of the story ….