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One of China's top automakers is considering buying a stake in the company from the U.S. government.  (Source: AP Photo)

The U.S. government is currently the majority owner of General Motors, America's largest automaker.  (Source: AP Photo)
GM is seeing red

A recent Dodge Chrysler commercial boldly proclaims, "Here's a couple of things America got right -- cars and freedom."

China's third largest automaker apparently agrees with the former assertion.  Shanghai Automotive Industry Corporation Chairman Hu Maoyuan on Monday said that his company was considering buying a stake in U.S. automaker General Motors (GM) if "conditions are favorable".

GM, like Chrysler, is currently recovering from bankruptcy.  It has posted encouraging financials despite having lost yet another chief executive.  It now awaits a key step in its recovery process -- a major divestment of the U.S. government's stake in the company via an initial public offering.

The company's return to profitability has come largely thanks to its offloading of laggard brands.  One of those GM brands -- Hummer -- sold to one of SAIC's Chinese rivals, Shanghai Automotive Industry Corporation (though the deal has since stalled).

SAIC CEO Hu comments, "GM is our important strategic partner.  We are not clear about the details of its IPO. We will make the right decision once we know details."

An investment would not be surprising, but would be a reversal of the pair's long-term relationship.  Today, thanks to a series of mergers and acquisitions, SAIC produces 2.72m vehicles a year, but it has long played the role of GM's smaller ally in China.  

The pair launched two joint ventures -- Shanghai GM (1997) and SAIC-GM-Wuling Automobile (2002).  SAIC helped GM become China's second highest selling foreign automaker, behind only Volkswagen.

Earlier this year, SAIC acquired a 1 percent additional stake in Shanghai GM, making it the majority owner of the company, a key business position.

While the Chinese automaker seems open to the idea of an investment in America's largest automaker, the French/Japanese auto alliance Renault SA-Nissan Motor Co. quickly dismissed speculation that it was interested in GM stock.  Carlos Ghosn, head of the alliance speaking at a plant opening in Zhengzhou, central China, said his companies had no interest in investing in GM.

GM and China's government recently were in a row over the government's refusal to subsidize the Chevy Volt EV while it would happily subsidize Chinese EVs.  The U.S. government, by contrast showed no interest in promoting American brands over foreign ones and offers equal subsidies for foreign EVs like the Nissan LEAF EV.



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so...
By Redwin on 9/20/2010 10:49:24 AM , Rating: 4
We spent Billions in tax dollars to rescue the "American" auto industry, so that we could make the business solid enough to attract Chinese buyers.

yea, I know its nowhere near as simple as that, but it still sort of stings, doesn't it?





RE: so...
By JasonMick (blog) on 9/20/2010 10:54:36 AM , Rating: 5
All your base are belong to us (China).

You have no chance to survive make your time.


RE: so...
By MrBlastman on 9/20/2010 12:32:02 PM , Rating: 2
It's kind of like giving weapons to terrorists--eventually they'll come back to haunt you. All that money we funneled into China for cheap labor, is now being used against us. :)


RE: so...
By Mitch101 on 9/20/2010 2:23:03 PM , Rating: 2
GM sells a lot of vehicles in China. In fact I believe they are the #1 auto supplier in China. China is probably interested in buying a large enough stake allowing them to keep a good portion of the money in China and acquire a century worth of automotive knowledge. Sounds like a double edged sword somewhere down the line.


RE: so...
By AliShawkat on 9/20/2010 10:13:05 PM , Rating: 4
you guys give weapons to terrorist's all the time so it not "it's like"


RE: so...
By mcnabney on 9/20/10, Rating: -1
RE: so...
By SigmundEXactos on 9/20/2010 11:43:33 AM , Rating: 2
At one of our corporate meetings, someone asked the CEO if rumors that Microsoft might buy us out has any merit. The reply: "We're a publicly traded company, anyone can buy us.".

Anyone can buy GM stock at their IPO, including you, me, or a Chinese company. There's nothing (intrinsically) wrong with that.


RE: so...
By drycrust3 on 9/20/2010 12:06:43 PM , Rating: 2
Last time I checked on the US National Debt, it was about $13.48T. I went to check just now and the server was down.
http://www.brillig.com/debt_clock/

Maybe it was just maintenance ...
Oh look ... it's working now.

Anyway, that money is borrowed money, and presumably some of it was borrowed from places like China and Saudi Arabia. If that is true, then I would guess a whole lot more "American" companies will soon have directors for whom English is a second language.


RE: so...
By FITCamaro on 9/20/10, Rating: 0
RE: so...
By kattanna on 9/20/2010 12:23:41 PM , Rating: 2
i would have thought that those whose GM stock became worthless when the US took over would be feeling the "sting" the most


RE: so...
By gamerk2 on 9/20/2010 12:42:00 PM , Rating: 3
You mean the people who actually OWNED the company and did nothing as its stock price plummeted from the $70/range down to below a buck a share?

I got news: GM was going bankrupt, one way or another. The only thing the Feds did was make sure GM went the way of Chap 11 (Bankrupcy) instead of Chap 13 (Liquidation).

Nevermind the government will make a PROFIT once it sells its shares in GM...


RE: so...
By FITCamaro on 9/20/10, Rating: 0
RE: so...
By Iaiken on 9/20/2010 3:14:29 PM , Rating: 2
For starters, they would go liquidated under Chapter 7.

The FIRST people who get paid are the holders of any secured debt. This is primarily made of collateral bondholders who gave loans on the value of the business and its physical assets and mortgage lenders who loaned against the land.

Next, if there is money left over from the above, non-management employees and pensioners of dissolved divisions are compensated for their loss of income by the trustee. Usually this comes from the pension funds if they haven't already been cannibalized by the above. Employees and pensioners that move with a sold devision, are usually not entitled to this as the new owner takes over obligations to them. This is one of the rare times that unions come in handy as they can negotiate group settlements with the trusty.

Lastly, stockholders and other unsecured lenders are entitled to squabble over the scraps in the courts... LAST.

Had GM gone Chapter 7 in spite of government intervention, it would have been a bloody mess as almost all of the secured debt had been renegotiated in exchange for equity in the new company.


RE: so...
By Reclaimer77 on 9/20/2010 8:04:53 PM , Rating: 1
quote:
For starters, they would go liquidated under Chapter 7.


How convenient...

Sorry but given that GM WAS making a good income (in 2008 they sold as many vehicles as Toyota) they were just swimming in debt from entitlement payments etc etc, I think Chapter 11 would have been far more likely.

Chapter 11 worked for the airlines multiple times, which are just as large and "too big to fail" as any car company. So the idea that GM would have had to "liquidate" is a complete Liberal fantasy used to support the Government bailout and takeover of GM. The idea that GM was somehow unique, and the government HAD to step in, is again a partisan politics fabrication.

Chapter 13 also *might* have been an option for GM as well. Although it has a debt limit, and I don't know if GM was past that limit at the time of the bailouts.


RE: so...
By Iaiken on 9/21/2010 1:45:50 PM , Rating: 2
quote:
Chapter 13 also *might* have been an option for GM as well. Although it has a debt limit, and I don't know if GM was past that limit at the time of the bailouts.


I was specifically referencing the claim that they would go chapter 13 if chapter 11 failed. They were FAR beyond the debt limit of a million dollars. Chapter 13 is mostly for small businesses and individuals.

By no means did I say that there was no other option than chapter 7, rather I was clearing up what form of liquidation they would be confronted with should it come to that and who would get payed and in what order.

There are a number of reasons why the government wanted to step in, not that it makes any of them valid. If GM was liquidated and the pension fund cannibalized to pay off debts, many of those pensioners would have gone on social assistance. However, practically every single reason was wrapped in a massive "IF", yet people reacted to each and every possibility as if it were certainty.

Chiefly, they wanted to ensure that they didn't take incomes away from the 750,000+ employees and pensioners that rely on GM for a living going in to the worst financial fiasco in over 70 years. Even then, it was a huge gamble and while it looks like it will pay off, it was certainly a case of preferential treatment and as such it was ethically bankrupt.


RE: so...
By FITCamaro on 9/20/2010 8:15:58 PM , Rating: 2
quote:
The FIRST people who get paid are the holders of any secured debt.


Yes and they got nothing. They refused to reduce what they would take, as they were not under any obligation to, and as a result the government seized the company and told them that they would get nothing.


RE: so...
By Iaiken on 9/20/2010 4:53:55 PM , Rating: 2
quote:
Nevermind the government will make a PROFIT once it sells its shares in GM...


That remains to be seen.

IPO's don't always earn the targeted share prices on the offer.

GM is NOT an attractive buy, it's SO unattractive that the majority of the shares will be preferred shares (secured by debt, but no voting rights).

Common stock will mostly be offered through the purchase of preferred stock that is then converted at a yet undisclosed rate.

So while it looks like there is light ahead for GM, they are not out of the woods yet and they will need to fight hard for more than just customers. They need to shake that Government Motors moniker, FAST!


RE: so...
By Reclaimer77 on 9/20/2010 5:56:35 PM , Rating: 3
quote:
They need to shake that Government Motors moniker, FAST!


How are they possibly going to do that though?


RE: so...
By Reclaimer77 on 9/20/2010 8:13:15 PM , Rating: 2
quote:
I got news: GM was going bankrupt, one way or another. The only thing the Feds did was make sure GM went the way of Chap 11 (Bankrupcy) instead of Chap 13 (Liquidation).


Federal aided bankruptcy is legally supposed to be handled by a bankruptcy judge in a federal court. It's a Judicial matter. GM was handled 100% by the Executive office, the President and the "Car czar" directly.

I'm really getting tired of having to explain the difference. I swear there are too many people walking around who believe this sort of thing is above the board and how Government backed bankruptcy should work. Educate yourself.


RE: so...
By Reclaimer77 on 9/20/2010 3:32:12 PM , Rating: 2
I said it then and I say it now. Bailouts should not have happened. Nothing good comes of it.


RE: so...
By IcePickFreak on 9/20/2010 3:45:27 PM , Rating: 2
Seems like selling Buick off could of been a viable option for GM to get some money together, since Buick is such a hit over there. China was/is shopping and I doubt Buick will be the savior of GM in North America - excuse me if I have little confidence in GM's grand plan (whatever it is), and I'm a GM guy.


Why not?
By TechIsGr8 on 9/20/2010 11:53:15 AM , Rating: 3
The Commies own most of this once fine country anyway, let them have it, lock, stock, and barrel.




RE: Why not?
By FITCamaro on 9/20/10, Rating: 0
RE: Why not?
By sviola on 9/20/2010 2:11:40 PM , Rating: 2
You know that the biggest Chinese comapnies are state controlled, right?


RE: Why not?
By FITCamaro on 9/20/2010 8:19:55 PM , Rating: 2
Yes. But at least if a business wants to open there, it can. China is succeeding because the government took capitalism's ideas and used it to their advantage. Please tell me of a large industry in this country anymore that is not state controlled by regulations and mandates or outright. Auto. Nope. Health care. Nope. Banks. Nope. Powerplants. Nope. Oil and gas production. Nope.


RE: Why not?
By Integral9 on 9/21/2010 10:30:14 AM , Rating: 2
How many of those aren't state run in China?


RE: Why not?
By mcs396 on 9/20/2010 2:47:15 PM , Rating: 2
FIT,
You talking about China or USA?


And why would they?
By JonnyDough on 9/21/2010 7:27:45 AM , Rating: 2
quote:
While the Chinese automaker seems open to the idea of an investment in America's largest automaker, the French/Japanese auto alliance Renault SA-Nissan Motor Co. quickly dismissed speculation that it was interested in GM stock. Carlos Ghosn, head of the alliance speaking at a plant opening in Zhengzhou, central China, said his companies had no interest in investing in GM.


Why would they have an interest in investment? It's cheaper just to send out factory worker spies and reverse engineer our cars until they are caught up with us technologically. Then they'll out sell us with cheap labor and lies about us to our potential buyers.




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