General Motors, Chinese partner to make commercial vehicles in India

General Motors (GM) and its Chinese partner SAIC Motor Corp are joining hands to make commercial vehicles in India, taking their successful Chinese partnership into one of the world's fastest growing auto markets.                                           

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

"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, Toyota Motor Corp and Ford Motor Co, 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 US 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.                                            

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 US government support that has made the US Treasury a 61% owner, but the company has made it a priority to repay debt to US 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.

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% 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% 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.                                           

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.                                           

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.