General Motors Co. and SAIC Motor Corp., who already operate eight joint ventures in China, have formed a new partnership to oversee their planned growth in Asia. Dubbed General Motors SAIC Investment Ltd., the 50:50 joint company, will be based in Hong Kong. Each partner is contributing $50 million to the new company.
As part of the expansion efforts, the companies will build and sell small cars and mini-commercial vehicles in India. The venture is expected to be finalized in the first quarter of next year.
The new relationship also calls for GM to transfer 1% of its stake in Shanghai GM to SAIC, giving the Chinese firm a controlling 51% stake. The 1% share is valued at $85 million, according to GM.
Gaining a majority stake in the China venture will allow SAIC to consolidate revenue from the partnership, the companies say. It also is expected to provide investors with a better understanding of the business. There are no plans to change Shanghai GM’s management team, although SAIC will increase its board representation from five directors to six.
GM agreed to the stake transfer in part to get greater cooperation from the Chinese government on “other unspecified matters,” according to Nick Reilly, the head of GM’s international operations until last Friday. Reilly was named president of GM Europe as part of a major senior management shakeup at GM.
In India, the partners are expected to invest up to $650 million, with GM’s half coming in the form of factories and a distribution network. They will use GM’s two manufacturing facilities and a powertrain plant in the country. Annual output could reach 225,000 vehicles by 2012, the companies estimate.
The companies plan to sell 300,000 minivans, mini-trucks and small cars per year in India by mid-next decade. The mini-commercial vehicles will be based on their SAIC-GM-Wuling Automotive Co. venture, which is China’s largest minivan maker. That venture is 50.1% owned by SAIC, and GM holds a 34% stake. Liuzhou Wuling Motors Co. owns the remaining 5.95%.
GM is on target to sell 75,000 vehicles on its own in India this year. It sold 65,700 vehicles there in 2008. The company’s current lineup includes six Chevrolet car and SUV models. Several additions are due next year, including the all-new Beat minicar.