Chinese Government-Owned SAIC May Invest Heavily in GM

61 percent of General Motors is owned by the U.S. Treasury, but could the American automaker soon be partially owned by the Chinese government? Perhaps, albeit in a roundabout way.

Reuters reports GM is currently in the final stage of discussions regarding selling equity to Chinese automaker Shanghai Automotive Industry Corporation (SAIC), which is in turn, owned in part by the Chinese government. Although the company previously indicated it was interested in purchasing a single-digit stake in GM through the company's initial public offering, that figure isn't firm. Early estimates predicted roughly 15 percent of GM's estimated $13 billion IPO would stem from foreign investors, although that tally could rise, especially if SAIC decides to increase its purchase.

SAIC's investment would, ironically, mirror an investment GM made nearly 13 years ago. In 1997, GM partnered with SAIC to form the Shanghai GM joint venture, which allowed the American firm to manufacture automobiles and expand its presence within the Chinese market. Predictably, SAIC is hungry to for access to both technology and the North American market, and a partnership with General Motors could be just the ticket.

GM, on the other hand, is still interested in furthering its success in China, which has served as a lynchpin of sorts for the company's success outside of North America. Last year, GM sold 1.8 million vehicles in China, accounting for 11.8 percent of the country's automotive market. GM presently holds a 49-percent stake in Shanghai GM, although the company is reportedly looking to increase its stake in the joint venture, along with pursuing a jointly developed electric vehicle for the Chinese market.

An obvious issue GM will need to deal with is the political and public backlash associated with selling a large stake to the government-owned SAIC. Still, there's something to the company's argument that a closer tie-up could only help GM increase its presence in emerging markets (Shanghai GM vans are also built and sold in India), which is seen as critical to the automaker's future growth.

At this point, this is far from a done deal. Even if GM and SAIC come to terms on an agreement by this weekend, which Automotive News suggests is entirely possible, SAIC's purchase still needs to clear a number of bureaucratic hurdles to receive approval from the Chinese government.

Source: Reuters, Automotive News (Subscription required)

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