GM prepares for Beijing Auto Show as it regains equal footing with SAIC

Article by Anita Panait, on April 21, 2012

The Beijing auto show slated to open next week is seen to offer top honchos from General Motors Co. a temporary relief from answering media and investor questions about the future of its money-losing European operations. During an entire week of Chinese frenzy, GM’s top bosses could focus on discussing the company about its footing in China, which is one of the biggest contributors to its rise as the world’s larger carmaker. 

Letting the figures speak, GM sold around 2.54 million vehicles in China, which is a tad higher than its sales in the United States, wherein the Detroit-based automaker delivered around 2.50 million units. The company continues to post strong figures in China, posting a nine-percent year-on-year growth for the first quarter of 2012, selling 745,152 units. The company also sold 257,944 vehicles in China in March 2012. All figures, though, include units sold though GM’s joint venture partners.

Aside from the news of strong sales performance, GM has another reason to jumpstart the Beijing auto show with a bang. GM chief executive Dan Akerson told The Wall Street Journal that the company has reached an agreement with Shanghai Automotive Industry Corp. (SAIC) to bring back its stake in a joint venture to 50%, allowing the US carmaker to have equal footing with its Chinese counterpart.

GM ceded to SAIC in 2009 a 51% stake and a controlling interest in the joint venture in exchange for fresh cash that it would use for its massive restructuring. The Journal said that all that remains is the approval from the Chinese government to seal the deal.

In a research note, Morgan Stanley analyst Adam Jonas said GM’s move to regain its stake in the SAIC joint venture is "an extremely important development," since it removes the company’s status as the junior or minority in the venture. Analysts have been worried that the company’s junior status would limit the company when taking a stand on key product decisions.

It also limits the ability to protect its intellectual property. Jonas remarked that GM having equal footing with SAIC is critical since the company rolls out global platforms and coordinates product strategy. The Morgan Stanley analyst said the deal could open the road for carmakers to expand in Europe and South America.

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