GM,Chinese partner join forces in India

The deal comes on the heels of GM’s board and CEO Fritz Henderson parting ways Tuesday,the board upset that the automaker’s turnaround wasn’t moving more swiftly and Henderson frustrated with second-guessing,two people close to the former CEO said. Board Chairman Ed Whitacre Jr. has taken over as CEO while a global search is conducted.

Analysts said the moves in China and India reflect the US automaker’s pressing need for money as it overhauls operations following a restructuring in US bankruptcy court.

The US government owns 60 per cent of GM after providing billions of dollars in loans.

“We have an outstanding relationship with SAIC,” said Nick Reilly,president of GM’s international operations,in a conference call with reporters. “It seemed to us very sensible and a big opportunity to deepen that relationship and broaden that relationship outside of China.”

GM agreed to turn over 1 per cent of Shanghai General Motors to SAIC,which will give the Chinese partner 51 percent of the company.

Reilly said GM valued that 1 per cent at USD 85 million. He said the transfer will give SAIC the right to

approve the joint venture’s budget and the appointment of senior managers,but he said the partners already operate that way and both are satisfied with management,so there should be no major changes.

Reilly said bringing in SAIC and its investment meant the Indian venture could develop more quickly. He said SAIC wanted majority ownership of the China venture so its financial results could be reported as part of SAIC’s earnings. He said GM agreed to that “to get their full cooperation and the full cooperation of the Chinese government in other things,” though gave no details.

“It also helps us,obviously,share the large investment that is behind this programme and therefore get it done faster,and bring in other products than we envisaged in our GM-only plan,” Reilly said.

Total investment in the India venture is expected to be more than USD 650 million,Reilly said. GM was contributing half in the form of factories and a distribution network in India and SAIC would provide the rest,he said,though declined to say whether that would be cash or other assets.