GM to buy back a 1 percent stake in its China car venture

Article by Christian A., on June 8, 2011

General Motors Co. aims to exercise an option to buy back a 1% stake in its main car venture in China to make it an equally held unit with its partner. At GM’s annual meeting in Detroit, GM CEO Dan Akerson told shareholders that the company has an option to buy that 1%.

In 2010, GM reduced its holding to 49% when it sold a 1% stake in Shanghai General Motors Co. to its partner SAIC Motor Corp. Back then, GM got a call option to repurchase the 1% stake.

For these shares, SAIC (which is the largest domestic automaker in China) paid $84.5 million. SAIC was then permitted to include Shanghai GM's revenue in its accounts as a majority shareholder according to new local accounting standards.

The Chinese government approved the deal in February 2010. SAIC spokeswoman Zhu Xiangjun said that if GM decides to repurchase, it has to comply with the condition that SAIC is allowed to include Shanghai GM's revenue into its accounts.

She added that this is the reason for buying the shares in the first place. In a statement to the city's stock exchange on Feb. 23, 2010, SAIC said that GM can do this if SAIC can put Shanghai GM revenue in its accounts without depending on the added 1% stake. GM is the biggest overseas automaker in China.

Topics: gm, china

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