New twist in the SAIC buying GM saga (and fair warnings to TTAC’s admins to allocate extra bandwidth). We’ve said all along that SAIC had designs on GM’s assets. That they would just wait until the time—make that until the price—is right. Well, the time is right. GM has until Tuesday to submit a new restructuring plan to the U.S. government detailing its progress cutting costs, shoring up its balance sheet and figuring out a way Fordward [sic]. So the time has never been righter, and the price is most likely commensurate. With all other deals failing, GM is getting ready to sell their crown jewels: their China operation.
Despite constant denials, General Motors has held talks with China’s SAIC Motor Corp about selling part of its stake in their joint venture or other assets as the U.S. automaker, Reuters reports. GM needs the cash, STAT. According to Reuters, GM approached SAIC Motor in recent weeks with an offer to sell some of its stake in their 50-50 joint venture that builds and markets Buick, Cadillac and Chevrolet models in China. And why would they do that?
Such a deal would make GM a minority partner at its decade-old flagship venture in China. It also would seal GM’s hopes of any meaningful growth. Shanghai General Motors is considered to be one of the remaining money makers at GM, and the Chinese market has just started to grow. Experts expect China to buy 30m cars by 2025 or earlier. In China, GM and its joint ventures in China posted 6 percent sales growth in 2008.
Besides their passenger car tie-up, GM and SAIC have seven other joint ventures in China, including an automotive finance company modeled after GMAC and a version of GM’s OnStar navigation service for the Chinese market. Reuters: “In the early stages of the talks, GM signaled a willingness to consider selling other assets in China to SAIC, according to one of those with knowledge of the discussions.”
We’ve made some calls to people we know, and the consensus is that these are not the leaks previously sprung by investment bankers to raise interest in possible deals. “Sounds and feels like this is the real thing. Lots of meetings and closed doors,” says a source who’s hoping to keep his or her job after GM is out of control in Shanghai.
More news as it develops . . .
Get rid of it while they can. The Chinese economy is in freefall.
A warm welcome to our new Chinese Masters! I hope you don’t F it all up like we did.
I saw this elsewhere and was just about to email Robert, but of course, you being in China and all, probably saw it quicker than we did anyway… right, Bertel?
Wow. Perhaps GM will also be able to “broom” a controlling interest in the Saturn “division” (and the sales arm) for a small nominal fee along with it.
Not forgetting that SAIC part-owns GMDaewoo, and that suddenly Saturn could be badged Daewoos! (The Aveo is built in Mexico, the rest of the cars would come from South Korea, but with the free trade agreement between the US and S. Korea… well, stranger things have happened).
Saturn could sell their “versions” of the Aveo, Cruze, Magna and Captiva SUV.
GM could retain a minority interest in Saturn, just as it still part-owns GMDaewoo.
@bluecon: It is? Aren’t you confusing countries? Last I looked China was the only remaining place on the planet that had at least some growth. I was told auto sales in China surpassed the U.S. in January. If that’s a free fall, then I’m all for it.
Bertel.. maybe, but they also have 20 million newly unemployed migrants.
They are a manufacturing economy when no one is buying…
And is anyone else not really that impressed that a country with 4xs as many people buys the same amount of cars (and only when the market has gone to hell).
China is not our master, China makes my underwear.
Loose the significant presence in the fastest growing economy and automotive market on earth.
Lay off all the engineers and designers.
Keep the company bankrupting US dealer network and UAW workers.
Brilliant.
The federal government needs to either put this into Chapter 11, or to void the UAW contract and all dealer contracts and worry about the lawsuits later. And for god’s sake Wagoner needs to be removed.
If the current course continues there will be nothing left to save.
The Chinese economy is in freefall
If they’re in freefall, we’ve turned on the afterburners and pointed the nose at the ground.
@toxicroach: 20 million represents 1.5% of their population. The number of unemployed migrants may even be higher, we’ll know more a little while after Chinese New Year (which ended Monday.) As harsh as it may sound: Those migrant workers will stay back at the farms in the countryside, not draw unemployment or social security and try to scratch a living from the soil that is in bad need of rain.
All in all, Chinese economy is doing well. January sales overall were good. China sits on a huge pile of money, and their people have savings. In a depression, cash is king. I’m in the export business from China myself. Yes, parts makers who make (or made) OEM parts are hurting. But as the world needs to save money, there is an uptick in orders for cheaper goods. Raw material and shipping prices are down. Energy costs down. All good for China.
China has a lot of problems. Failure to provide full employment puts it at risk for social instability. Its engineers are currently pretty worthless. And the government has switched from using firing squads to roaming execution buses because the execution buses make it easier harvest the dead prisoner’s organs and sell them.
However abandoning or selling off a position in China’s auto market is myopic and stupid. China will be the largest auto market in the world.
How can I prove that the decision is myopic and stupid? GM management is making the decision.
Note to BS: Automotive News recently said that GM was using fuzzy numbers when it said car sales were higher in China. Turns out that the Chinese numbers included commercial vehicles, while the U.S. numbers did not.
Well, when 2002 SAIC LeSabres hit the US auto market in Feb. 2010 at a retail price of $4999, we`ll know why.
Communist China is eating our lunch with US greenbacks supplied via Walmart and all of the same short sighted folks that wouldn’t hesitate to buy a Chinese car when offered here in the US market.
@Michael: True. Hard to keep apart, as minivans for instance are counted as commercial vehicles. The car you rode in when in China is counted as a commercial vehicle.
Sell ’em the whole Bu-ick brand today, before they think it over and ask themselves “Why?’.
Bunter
I thought we’ve been saying all along that the Chinese government were going to nationalize the foreign companies? Where are those people now? Did they get their kidneys snatched?
MikeInCanada: I think that should properly be stated as: “I, for one, welcome our new Chinese overlords.”
There is nothing to keep the Chinese government from simply voiding the ownership of foreign investments at all.
When you hold the rest of the world by the short & curlies, it’s hard to get an argument, eh?
The 21st Century may end up being the Century of the Chinese, just as the 19th Century was the Century of the British and the 20th Century was the Century of the Americans.
It doesn’t have to be exactly from the calendar years pertaining to the century change. Just the lion’s share of the century.
China are sneaky. They claim to be damn commies and yet all the while the rest of the world is turning to a God-awful mixture of marxism and fascism, they’re busy with mixed-capitalism… and making a go of it.
Once they actually get their human rights abuses sorted out (and I suspect that they will), and start figuring out how to design and engineer all manner of products instead of stealing intellectual property (and I suspect that they will), they will be the predominent nation for quite awhile.
It may not be so bad for America and Americans. Britons don’t live in abject poverty, after all…
Jared, ditto, that and he’s in Canada…
Have a look here… start at about 7:05
http://www.youtube.com/watch?v=ZC_Z8JSG9hQ
Pretty well sums up the worldwide situation in a minute and a half of cartoon… sadly.
We should pass a law that says that if China buys anything from GM, they have to take Wagoner, too. that’ll fix em.
menno:
Spot on, I think most people are hoping China can become a successful, developed country. The alternatives are worse.
There is nothing to keep the Chinese government from simply voiding the ownership of foreign investments at all.
Yes there is: Keep buying their stuff. China is and has always been a nation of traders. They know that it isn’t good for trade to p.o. your customer. That’s why foreigners are welcome and well treated in China: Because they bring money. As long as the world buys their goods, foreign investment will be safer in China than anywhere else.
China is very aware of trade issues and they are doing everything to keep their markets open. From being the banker of the U.S. down to raising the value of their currency in order to stave off a trade war. They know it’s easy to find another source for t-shirts.
Where you don’t want to be is in a relationship as with the Russians, who run roughshod over their foreign partners. Russia doesn’t export much except a strategic commodity: Energy. They pretty much have a monopoly on gas to Europe. Rub them the wrong way, and suddenly “technical problems” occur at the pipeline. Or they shut off gas to Ukraine and with it gas to all of Europe.
China would be absolutely stupid if they would nationalize foreign investment. It would kill their exports and of course foreign investment, on which they very much rely on. Foreign Direct Investment into China is a closely watched metric. They aren’t stupid, trust me.
The story above is testament. Why buy GM out if your could just shove them out of the door? Because buying it at a good price makes better business sense, and shoving them out of the door would turn China’s trade upside-down immediately.
The China economy suffers from the same problems as the US. A stock market that has crashed more than the Dow reflects that.(admitately it has rebounded some) Their stock market is predicting the future economy since they have the problem of their export markets drying up. The real estate market is in turmoil with a huge over supply and millions are losing their jobs. As the West plummets the Chinese are going to follow. Most people of China make a tiny amount of money compared to Americans and the Chinese are still buying up the American debt because they believe they have no choice.
It is like the old story of the scorpion riding on the back of the frog in the pond. If the scorpion stings the frog he will drown.
China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its “only option” in a perilous world, a senior Chinese banking regulator said on Wednesday.
http://www.ft.com/cms/s/0/ba857be6-f88f-11dd-aae8-000077b07658.html
People buy Chrysler and GM crap cars. They’ll buy Chinese, from Wal-Mart. I might as well place the money on the table – it’s a sure thing.
There are so many false stories about GM. I bet this is another one on them. I guess your down, the media loves to step on you.