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The world's top auto maker General Motors, along with its Chinese partner, have been granted a 50% stake in a money-losing auto plant in north-east China's Liaoning Province, the fourth joint-venture between the two sides. CRI Shanghai correspondent Lin Lin has the story.
Set up six years ago, the Shenyang SUV manufacturer was half owned by GM with a quarter share held by Jinbei Automative and the remaining share held by three local government organisations.
Despite the high profile of its parent company Jinbei has failed to escape the trap of a large inventory combined with poor sales. Last year Jinbei sold just 3,300 SUVs, a mere 10% of it's production capacity. Compared to an inventory surplus of 700, such sales figures were deemed unsustainable.
Under the new deal, GM will cut its direct holding of 50 percent to 25 percent by transferring half of its stake to the Shanghai Automotive Industry Corporation, who have previously engaged in three joint-ventures with GM.
Shanghai GM, a profitable joint venture between Shanghai Auto and GM, will be the biggest winner, receiving a 50 percent slice of this potentially lucrative pie. The move is expected to utilize Shanghai GM's nationwide sales network, thus fleshing out the plant's skimpy production slate.
President of key national auto group Shanghai Auto, Hu Maoyuan says his company are seeking to stay astride of industry restructuring by leading the way in mergers and consolidations. Although he declined to comment on how much new investment will be required to revitalize the money-losing factory, early reports have revealed that he will be forced to fork out a minimum initial payment of at least US$17 million. This sum will be both compensation for loans provided to Jinbei GM and payment for the 25 percent stake itself.
Almost simultaneously, GM and Shanghai Auto announced another acquisition; the purchase of a half-stake in a multi-million government-controlled plant in east China's Shandong Province. The Joint Venture Shanghai GM, as in Shenyang, will take the remaining 50 percent.
Vice Governor of Shandong Province, Wang Ranyuan described the alliance as the best choice for all parties, saying it will facilitate more effective distribution of resources.
Analysts see the deal as vital to GM's ambitions to catch up Volkswagen, the most dominant player in the Chinese market. Last year, the German auto giant got nearly one third of China's auto market, with GM trailing behind with less than nine percent.
So the expansion is expected to enlarge GM's presence in the world's most dynamic vehicle market, but what auto models this giant new comer will use to announce its presence is, as yet, unclear.
(CRI March 9, 2004)
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