GM: Looking for Cash on All Fronts
By Michelle Krebs February 12, 2009By Michelle Krebs
DETROIT -- General Motors is denying it has held talks with its Chinese partner, SAIC Motor Corp., about selling part of its stake in their joint venture or other assets as the automaker tries to raise.
Reuters news service quoted sources saying the two had been in such talks. GM issued a statement saying: "There is no truth to the story that we are planning to sell Shanghai GM shares to our partner SAIC."
Meantime, GM has attracted interest in Hummer from an unnamed Chinese company and a private-equity firm, sources told Bloomberg News. In Sweden, GM is seeking $600 million in loan guarantees from the government to keep Saab afloat until a buyer can be found or the brand can be restructured, Bloomberg News also reported.
GM said last summer it wanted to raise $4 billion from asset sales. It has made little progress in that goal as it scrambles to meet the February 17 deadline to file its restructuring plan to the federal government in order to keep the loans it has received and possibly obtain more.
Scaling Back China Investment Is Risky Business
GM approached its partner and China's largest automaker, SAIC, in recent weeks with an offer to sell some of its stake in their 50-50 joint venture, according to sources quoted by Reuters. GM's proposal would make GM a minority partner in the venture.
GM's performance in China has been one of the automaker's few bright spots. GM moved into China a decade ago. At the time, skeptics criticized GM for the move. However, GM got in on the ground floor and was established to capitalize on the phenomenal growth in Chinese car sales. Today, GM is China's sales leader; it sells more Buicks in China than in the U.S.
Moving into China early also gave GM to select the best dance partner in SAIC, which also partners with Volkswagen, the No. 2 in China; latecomers to the market got the leftovers.
GM's partnership with SAIC has been a successful one and has grown over the years. In addition to their 50-50 joint venture to build and market Buick, Cadillac and Chevrolet, the pair has seven other joint ventures, including a finance company, a version of OnStar and a three-party venture with commercial truck maker Wuling.
Selling off some of its Chinese business is risky business. Sales in China, which exceeded those in the U.S. in January for the first time in history, have slowed but are still growing and are expected to rebound significantly when the global economy recovers. GM could miss out on that growth with a diminished role in the market.
GM also reportedly is discussing a venture with China's other leading automaker, FAW Group, which partners with Volkswagen and Toyota, for a commercial vehicle venture. GM and FAW reportedly have registered a company with the Chinese government.
Hummer May Fetch Little
GM has said it will report on its plans for the ailing Hummer brand by the end of the first quarter, GM executives have said. The brand is up for sale but if no buyer is found, it could remain in the GM family in scaled-down form as is being done with Pontiac or be eliminated altogether.
Bloomberg, quoting an unnamed source, said the pace of negotiations for Hummer had intensified in the past few weeks, and more meetings were planned.
However, GM shouldn't expect to get much for Hummer. Hummer sales plummeted when gas prices hit their peak last summer. Despite the retreat of gas prices, Hummer sales have not rebounded as SUVs -- the only kind of vehicle Hummer makes and sells -- are out of fashion. One analyst put Hummer's worth at $100 million or less.
Seeking Cash for Saab in Sweden
AutoObserver has been reporting that GM wants to reestablish Saab as a private entity with the help of the Swedish government. Now the cost has been revealed. GM is asking Sweden to guarantee $600 million in European Investment Bank loans to keep Saab operating until it can be restructured for sale, a source told Bloomberg.
The loans, along with about $400 million from GM, would allow Saab to introduce new models that would keep Saab competitive. Saab will introduce the 2010 9-3X at the upcoming Geneva Motor Show. The brand is nearing completion of a replacement for its flagship 9-5 full-size sedan later this year. Also rumored is a smaller 9-1 to compete with the BMW 1 Series and Mini Cooper.
If Saab doesn't get the aid, it may be forced into restructuring under Swedish law, the source told Bloomberg.
Photos by GM
1 - General Motors Vice President Global Design Ed Welburn (left) and GM CEO Rick Wagoner (center) stand with Chinese dignitaries as the new Buick Invicta show car made its world debut at the start of the Beijing auto show last spring. Designed in China and the U.S., the midsize sedan will be sold in the U.S. as the Buick LaCrosse.(Photo by Natalie Behring for GM.
2 - Soaring gas prices made SUVs like the rugged Hummer H3T unfashionable.
3 - Saab introduces the 9-3X crossover at the upcoming Geneva Motor Show.
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I'd hate to see GM go.
GM needs to avoid the Federal Car Czar/Task Force process and file Chapter 11, to get quickly through the process of reorganization and get to the task of building interesting, high quality, desirable vehicles.
The federal “assistance” process will just prolong the agony and expose GM to constraints which may make recovery unfeasible.
Chapter 11 is a very serious process, which has been used successfully by large organizations (e.g., United Airlines), to restructure and emerge. For months now we have been hearing the chorus from Big three executives, that bankruptcy is not an option – nonsense! In the time since the infamous November Congressional hearings – how much worse could it get? By hovering near bankruptcy, spending a lot of time saying “bankruptcy is not an option” (equivalent of – “hey everybody, stop looking at that train wreck, look over here!”) has simply reinforced the sub-text that it sure is an option. Whatever damage could be done to consumer confidence and willingness to buy from a firm in difficulty has already been done.
Entry into bankruptcy would allow direct progress on the shedding of dealerships and on the re-structuring off UAW agreements. No other option offers such clarity. The political process that GM will open itself up to by going for further federal aid is just slow suicide. Imagine all the foolish directions coming from Washington – which will complicate the task by an order of magnitude. Think outside of the box and file bankruptcy, so that GM can survive and emerge and get back to their essential purpose - building cars (and not providing healthcare benefits to the universe, being green, or managing a crisis, etc.).
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