Shanghai Auto, General Motors' main partner in China, will create a shareholding firm to hold its car assets, revamping itself before a long-awaited IPO as it ponders a series of multi-billion dollar overseas forays.

The plan, unveiled in an exchange filing Saturday, offers a glimpse into Shanghai Automotive Industry (Group) Corp.'s (SAIC) preparations for a domestic or overseas share float that could raise as much as US$2 billion in 2005 or beyond.

SAIC, which will buy 48.9 percent of South Korea's Ssangyong Motor Co. for about US$500 million and was talking with Britain's MG Rover about setting up a venture, aims to put its car assets into a new firm - Shanghai Automotive Group Co. Ltd., said spokesman Xue Hao.

The new company, which would serve as SAIC's public face, would also own SAIC's half-stakes in car-making ventures with GM and Volkswagen AG in China's financial hub Shanghai, Xue added.

State-run SAIC is one of a coterie of ambitious homegrown corporations hoping to make it big globally, despite a worsening car sales slowdown in the world's fourth-largest vehicle market.
It awaits regulatory and cabinet approval for its makeover.

"We are now devising plans related to future fund-raising and development," Xue said.

"The Ssangyong purchase would help us in our global undertaking," Xue said

Unlisted SAIC wants to join the ranks of the world's six biggest automakers by 2010 - despite never having disclosed a plan to crank out its own brand of cars.

The new company would also own 70 percent of Shanghai Automotive Co. Ltd. - listed in China's commercial hub and closed to investment by all but the largest institutions.

"The carmaker had won approval for the plan from the city government and was awaiting approval of regulators and the State Council," the Shanghai-listed company said in a statement published on the exchange Web site (www.sse.com.cn).

Both SAIC and Rover - Britain's last independent volume carmaker- have said reports of 1 billion pounds (US$1.86 billion) of investment in a car venture were premature.

SAIC says it had not picked banks to arrange its overseas IPO, Xue said.

Fortune magazine, which ranked SAIC number 461st in its Fortune 500 rankings, estimated the group reaped annual profits of almost US$700 million. The State-owned company sold 782,000 vehicles last year, and makes buses, trucks, motorcycles and tractors.

(Shenzhen Daily November 29, 2004)