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SAIC Takes Controlling Interest of GM Joint Venture

Automotive balance of power and jobs shift toward Chinese.

by on Dec.05, 2009

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Shanghai Automotive Industry Corporation and General Motors Company announced they are expanding their cooperation in Asia and targeting the Indian and other emerging auto markets by forming a Hong Kong-based firm, General Motors SAIC Investment Limited.

As part of the deal, the state owned SAIC is taking 51% controlling interest of Shanghai GM since cash-starved GM is selling 1% if its 50% share.

Though largely symbolic, it will be viewed as a setback for GM in Asian cultures, which put an emphasis on “face.”

It is also an indicator of how fragile GM’s financial condition remains  — in the latest quarter it lost $1.2 billion — as far healthier automakers regroup for a new emerging world order that sees the European and American markets depressed while emerging markets in Asia grow rapidly.

Earlier in the week GM CEO Fritz Henderson left the company.

GM said in a statement that “this will assist China’s leading listed automotive company in consolidating Shanghai GM revenue into SAIC Motor, which will provide investors a clear understanding of its business.”

“Over the past decade, SAIC and GM have created one of the world’s most successful automotive industry partnerships,” said Nick Reilly, GM Executive Vice President and lame-duck President of GM International Operations. “Both companies felt this was the proper time to deepen cooperation beyond China’s borders in order to enhance our partnership as part of our individual companies’ long-term growth strategies.”

GM its Chinese joint ventures sold 177,339 vehicles in China in November, which represented an increase of 110% from November 2008, and set a new record for the month. For the first 11 months of 2009, GM sales in China totaled 1,636,799 units, an increase of 64% from the same period in 2008 and a new high for the January-November period. GM is the second largest automaker in China after Volkswagen.

SAIC and GM  plan to expand in emerging markets, beginning with India. GM’s two vehicle-manufacturing facilities and a powertrain plant in India, as well as GM’s nationwide distribution network are all part of the new joint venture.

Small inexpensive cars from Shanghai GM and small commercial vehicles from SAIC-GM-Wuling will be designed in China and produced and sold in India.

The establishment of the Indian joint venture is expected to be completed during the first quarter of 2010.

“Changes in the worldwide economy have created new opportunities in emerging markets,” according to Hu Maoyuan, Chairman of SAIC. “By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets.”

SAIC and GM began working together in 1997 when they formed Shanghai GM and the Pan Asia Technical Automotive Center (PATAC) engineering and design joint venture.

This was followed by the launch of six additional China joint ventures, including SAIC-GM-Wuling; GMAC-SAIC Automotive Finance Company, China’s first automotive financing company; and Shanghai OnStar Telematics, which will provide communication services for some Shanghai GM models starting this month.

Since it began regular production in 1999, Shanghai GM’s domestic sales have grown exponentially in what is now the world’s largest auto market. Through November 2009, Shanghai GM has sold 2,973,411 vehicles.

Since its establishment in 2002, SAIC-GM-Wuling’s domestic sales have grown more than four times, with sales through November 2009 totaling 3,384,848 units. It has been China’s leading producer of mini-commercial vehicles for the past three years.

PATAC engineers products for both joint ventures based on local preferences, regulations and driving conditions.

SAIC Motor Corporation, Limited (SAIC Motor), formally known as Shanghai Automotive Co., Ltd., went public on the Shanghai Stock Exchange in November 1997 with a stock code of 600104. It was restructured in 2006. SAIC Motor is the largest listed vehicle corporation on the A-share stock market in China. As of December 31, 2008, SAIC Motor owned total capital stock of 6.55 billion shares, with consolidated assets of RMB 107.86 billion. It has more than and 60,000 employees. Its controlling shareholder is SAIC Group.

GM and its partners produce cars and trucks in 34 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Saab, Vauxhall and Wuling.

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