GM gets SAIC to agree on equal power in making JV product decisions

Article by Christian Andrei, on April 19, 2012

General Motors and its Chinese partner Shanghai Automotive Industry Corp. have come to an agreement that GM will have equal control of key decisions in their Shanghai General Motors Co. joint venture, according to reports from Reuters and The Wall Street Journal. Currently, GM controls 49% of the joint venture while SAIC holds 51% control. 

GM's Chief Executive Officer Dan Akerson disclosed to the Journal that the companies intend to divide Shanghai GM into two units, namely operations and sales. General Motors would own 50% of the operations unit, which would create product decisions.

On the other hand, SAIC would keep 51% of the sales unit, allowing the Chinese vehicle manufacturer to book the revenue of the joint venture. The municipal authorities of Shanghai and the central government have yet to approve the deal. Akerson informed the Journal that he looks forward to obtain approval in the "intermediate to near term." In 2009, SAIC gained control of the partnership when a cash-strapped GM sold a 1% share for $84.5 million.

Since then, the two automakers have worked closely on several endeavors, including the sale of microvans in India, the launch of the new Chinese vehicle brand Baojun and the export of automobiles to South America. During the initial public offering of GM in 2010, SAIC obtained a 1% share in the Detroit vehicle manufacturer for around $500 million.

The new deal strengthens a relationship between SAIC and GM that is beginning to look like a worldwide alliance. Shanghai GM is already the largest vehicle manufacturer in China in terms of sales. SAIC is in a similar joint venture with Volkswagen AG, with a 50-50 share. The venture is called Shanghai Volkswagen.

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