GM aims to buy back 1% of Chinese venture

Reading Time: 2 minutes

News like this to your inbox or phone?

Weekly summary to your inbox

Never miss and important news

Get Instant notification once the news is published.

General Motors Co (GM), the biggest overseas automaker in China, said it intends to exercise an option to buy back a 1 percent stake in its main car venture in the country to make it an equally held unit with its partner.

- Advertisement -

“We have an option to buy that 1 percent,” Chief Executive Officer Dan Akerson told shareholders on Monday at the automaker’s annual meeting in Detroit. “It’s our intention to exercise that.”

- Advertisement -

GM sold a 1 percent stake in Shanghai General Motors Co to its partner SAIC Motor Corp in 2010, reducing its holding to 49 percent. GM received a call option at the time to repurchase the 1 percent stake.

SAIC, China’s largest domestic carmaker, paid $84.5 million for the shares, which allowed it to include Shanghai GM’s revenue in its accounts as a majority shareholder under new local accounting standards.

The deal was approved by the Chinese government in February 2010.

- Advertisement -

“Any possible repurchase by GM needs to meet the condition that SAIC can include Shanghai GM’s revenue in our accounts,” said Zhu Xiangjun, a spokeswoman for SAIC. “That’s why we bought the shares in the first place.”

GM can repurchase the stake if SAIC is able to include Shanghai GM revenue in its accounts without relying on the additional 1 percent stake, the Shanghai-based automaker said in a statement to the city’s stock exchange on Feb 23, 2010.

“GM may find it difficult to buy back its stake because it’s not in the interest of SAIC or the Chinese government to sell,” said Zhang Xin, an analyst with Guotai Junan Securities Co in Beijing.

“The Chinese government has been encouraging automakers to be independent and they’re unlikely to approve GM’s repurchase unless GM can offer some attractive terms in exchange.”

In China, GM also holds a 44 percent stake in SAIC-GM- Wuling Automotive Co, which sells the country’s best-selling vehicle, the Wuling Sunshine minivan.

Even as the automaker sells more cars in China than in the United States, it earns more profit in the US, where it delivered 2.22 million vehicles in 2010.

GM’s North American operations had profit before interest and taxes of $2.13 billion in the second quarter, while the company’s international operations, including China, earned $646 million, it said on Nov 10.

Via: ChinaDaily.

- Advertisement -
- Advertisement -


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -