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* GM, China’s SAIC in India commercial vehicles tie-up

Stocks  |  Mergers & Acquisitions

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* SAIC expansion in line with China’s global auto dreams

By Fang Yan and Soyoung Kim

SHANGHAI/DETROIT, Dec 4 (Reuters) – General Motors and
Chinese partner SAIC Motor Corp (600104.SS) are to team up to
make commercial vehicles in India, taking their successful
Chinese partnership into one of the world’s fastest growing
auto markets.

GM [GM.UL] will also sell majority control of its China car
venture to SAIC in a series of deals that give GM a timely cash
injection as it restructures after emerging from bankruptcy,
and give China a back-door entry into India’s booming market.
[ID:nBOM101517]

“India is a test case of SAIC’s ambition for overseas
expansion, and it may further expand into South East Asia when
the time is right,” said Johnny Wong, auto analyst at Yuanta.

The GM SAIC partnership is one of the most successful
tie-ups between a foreign and local automaker in China, helping
both companies in a fiercely competitive market where they vie
with Volkswagen (VOWG.DE), Toyota Motor Corp (7203.T) and Ford
Motor Co (F.N), among others.

“It seems to me that SAIC’s status in the tie-up is
obviously rising,” said Qin Xuwen, an analyst with Orient
Securities. “The tide has started to turn. They are equal
partners now.”

GM India said its U.S. parent would collaborate with SAIC
to develop and make commercial vehicles and other products for
India and for export.

That collaboration, which should be finalised soon, would
give the Indian unit access to mini-commercial vehicles and
other products from GM’s joint venture in China, GM India said
in a statement. [ID:nBMA006561]

For years, Chinese automakers have been churning out
foreign brands through local tie-ups with Volkswagen, Toyota
and others or have focused their own production on basic and
cheap models aimed only at the domestic market – now the
world’s biggest.

Snapping up assets from distressed auto giants offers them
a shortcut to global markets and helps them raise both their
technical expertise and their profile.

The deals with SAIC come as GM has opted to retain and turn
around its European Opel operations in a restructuring
estimated to cost about 3.3 billion euros, reversing a decision
to sell a controlling stake in the unit.

GM had a cash hoard of nearly $43 billion at end-September
thanks to $50 billion of U.S. government support that has made
the U.S. Treasury a 61 percent owner, but the company has made
it a priority to repay debt to U.S. taxpayers quickly, possibly
as early as June.

Earlier this week, GM’s CEO Fritz Henderson abruptly
resigned after the company’s board decided the automaker needed
to push its restructuring faster under new leadership.
[ID:nN01521400]

On Thursday, SAIC suspended trading in its shares on the
Shanghai market pending an announcement on what it called a
“major asset restructuring”.

SAIC President Chen Hong has previously said the company
was very interested in entering the Indian market and listed it
as second in terms of potential after China.

There is very little Chinese presence in the Indian auto
sector. There are a number of ventures between Chinese and
Indian firms making electric two-wheelers, but these are tiny.

Bilateral trade between India and China has grown in recent
years but New Delhi, worried about security risks, has taken
steps to regulate the entry of Chinese investments and workers.

KEY MARKET

China’s auto market has been a major bright spot this year
amid a steeper-than-expected global industry downturn, thanks
to Beijing’s stimulus measures which has significantly
bolstered consumer confidence. GM has been one of the biggest
beneficiaries.

January-October sales at GM’s Shanghai venture with SAIC
rose 46.5 percent to 548,707 vehicles. The decade-old flagship
venture with SAIC sells passenger cars under the Cadillac,
Buick and Chevrolet brands.

GM in its global restructuring opted to retain Buick due to
its popularity in China while it was closing or selling other
units.

The China results are in contrast to GM’s home market,
where sales fell 32 percent through November to around 1.9
million vehicles.

In a sign that Beijing Automotive Industry Holding Corp
(BAIC) might still be keen to buy GM’s Saab unit, Bank of China
said it provided BAIC with a 20 billion yuan ($2.9 billion)
line of credit. [ID:nBJB003594]

The Beijing-based carmaker has said it might still be
interested in Saab, after a consortium led by Swedish luxury
car maker Koenigsegg pulled out of talks last week. BAIC was
part of that consortium. [ID:nPEK20085]

GM and SAIC have many other joint ventures in China as
well, including an automotive finance firm modelled after GMAC
and a three-way commercial vehicle tie-up with Lizhou Wuling
Automobile.

GM’s joint ventures in China sold a combined 1.46 million
units through the first 10 months of 2009.
($=6.83 yuan)
(Additional reporting by Reuters reporters in DETROIT, HONG
KONG and MUMBAI; Writing by Anshuman Daga, Editing by Ian
Geoghegan)
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