HONG KONG — General Motors has reached an agreement to sell about half of its India operations and a small stake in its China business to its main joint-venture partner in China, people with a detailed knowledge of the transaction said on Thursday evening.þþG.M.’s main partner in China, the Shanghai Automotive Industry Corporation, better known as S.A.I.C., suspended trading in its shares on the Shanghai stock market on Thursday pending an announcement, but declined to release details. G.M. said in a statement that it was constantly in discussions with S.A.I.C. on various issues, but also did not disclose any details.þþG.M.’s international operations have been in a quiet but intense search for cash this autumn to cover losses incurred when its South Korean subsidiary, Daewoo, lost $2 billion last year on a bad bet on financial derivatives based on the Korean won and then burned through its remaining lines of credit during the recent global downturn.þþG.M.’s lawyers advised Daewoo that it could not raise money from G.M.’s American operations because of the large role the United States government still played after G.M.’s recent bankruptcy and refinancing.þþIt was not immediately clear on Thursday night how much cash G.M. would raise from the two transactions with S.A.I.C. “It’s a big deal, it’s a good deal,” a person close to G.M. said.þþG.M. has become the second-largest automaker in China mainly through a 50-50 venture with S.A.I.C. that makes a wide range of G.M.-designed cars. Under the deal being completed, G.M. would sell a 1 percent stake in the venture to S.A.I.C., raising the Chinese automaker’s share to 51 percent, although G.M. would retain equal voting rights in company decisions and have an option to buy back the stake later, people with knowledge of the transaction said.þþMichael Dunne, an auto consultant specializing in Asian markets, said that for G.M. to accept a minority holding in its main joint venture marked an inevitable decline in G.M.’s influence in China, which has overtaken the United States as the world’s largest auto market.þþ“Dropping below the 50-50 partnership is huge — there may be a way to preserve voting rights, but symbolically, it is a step down,” Mr. Dunne said.þþG.M. is separately putting its Indian operations into a new joint venture with S.A.I.C., effectively selling about half of the operations to S.A.I.C. as well.þþG.M. also holds a 34 percent stake in a successful manufacturer of very inexpensive minivans and pickup trucks, S.A.I.C.-G.M.-Wuling Automobile, while S.A.I.C. owns 50.1 percent. The city of Liuzhou, in southernmost China, owns the rest of that venture.þþYale Zhang, the director of greater China vehicle forecasting at CSM Worldwide, a big auto consulting company, said that Wuling was a natural choice to expand in India because it sold some of the world’s lowest-cost light vehicles. Its $4,000 minivans and pickups have been extremely successful in less prosperous areas of China.þþWuling has little knowledge of the Indian market, however, and G.M. could provide that, Mr. Zhang said.þ
Source: NY Times
