General Motors Co. and SAIC Motor Corp. further expands their 13-year partnership by agreeing to jointly develop small engines and transmissions. Last December, these two companies had agreed to set up a joint venture in India to produce small cars and commercial vehicles.
This latest deal leads the way for GM to cope with the demand for small city cars in growing markets and reduce the costs of developing fuel-saving technologies for the US market, where it will have to comply with the new fuel economy standards by 2016.
Analysts said that potential investors will be considering how it manages a strategy for sustained growth in the Chinese auto market.
GM is expected to announce plans for a public offering of stock in a filing with securities regulators as early as Wednesday that will enable the Obama administration to lower its 61% stake in the automaker. Industry observers said that this IPO reveals another chance for GM and SAIC to have closer ties.
Sheng Ye, associate research director at industry consultancy Ipsos' Greater China region, said that the GM-SAIC partnership is "the most successful one" in China's auto industry.
He believes that it's highly likely that SAIC will take a stake in GM. At the sidelines of a news conference, SAIC Chairman Hu Maoyuan was asked about this possibility. He declined to comment about the company's possible participation in GM's IPO, explaining that it has yet to study the details of the IPO.