In an effort to raise capital, General Motors is reportedly selling half of its Indian operations and a small stake in its China business to its main joint venture partner in China.
According to The New York Times, people with a detailed knowledge of the matter said GM and its main joint venture partner in China, SAIC, have reached a saleagreement. In exchange for half of its Indian operations and part of its China business, GM will get cash and an increased stake in a second Chinese venture.
GM’s international operations have been quietly looking for cash ever since GM’s South Korean subsidiary, Daewoo, made a bad investment and lost an unspecified amount of money. Due to the government’s role in GM’s bankruptcy, GM’s international operations cannot turn to their parent company for money. The sources would not reveal how much money the sale is for. “It’s a big deal; it’s good deal,” commented one person.
Under the proposed sale, GM will sell half its Indian operations as well as a1 percent stake in its venture with SAIC, raising the Chinese automaker’s share in the venture from 50 percent to 51 percent. Although SAIC will have the majority share, GM will retain an equal voting share. GM also has the option to buy back the share later if it wishes.
“Dropping below the 50-50 partnership is huge -- there may be a way to preserve voting rights, but symbolically, it is a step down,” said Michael Dunne, an auto consultant specializing in Asian markets. He also said that GM accepting a minority share in its main Chinese joint venture marks an inevitable decline in GM’s influence in China, which has become the world’s largest auto market.
Source: New York Times