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

Article by Christian A., 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 percent of the joint venture while SAIC holds 51 percent 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 percent of the operations unit, which would create product decisions.

On the other hand, SAIC would keep 51 percent 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 percent 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 as well as the export of automobiles to South America. During the initial public offering of GM in 2010, SAIC obtained a 1 percent 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 global 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.

The Shanghai General Motors Company joint venture was founded on June 12, 1997 with 50-percent investment each from GM and SAIC Motor. The joint venture started building its first vehicle in Shanghai, China in 1999. In February 2010, SAIC Motor acquired an additional 1 percent stake in the joint venture, thereby increasing its total holdings in Shanghai-GM to 51 percent.

Shanghai General Motors Co isn't the only joint venture that GM has in China. Its other joint ventures in the country includes SAIC-GM (Shenyang) Norsom Motors Co., Pan Asia Technical Automotive Center Co., SAIC-GM Dong Yue Motors Co., SAIC-GM-Wuling Automobile Co., SAIC-GM Dong Yue Powertrain Co., Shanghai OnStar Telematics Co., SAIC-GMAC Automotive Finance Co., SAIC General Motors Sales Co., Ltd. as well as FAW-GM Light Duty Commercial Vehicle Co.

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