GM, Chinese partner announce Indian venture

BEIJING — General Motors Co. gave up control of its main China joint venture to its local partner Friday and said they will jointly sell vehicles in India, uniting them in the world's two fastest-growing auto markets.

Analysts said the moves reflect the biggest U.S. automaker's pressing need for money as it overhauls its global operations following a restructuring in U.S. bankruptcy court.

Detroit-based GM said it will surrender 1 percent of Shanghai General Motors to Shanghai Automotive Industries Corp. That would give SAIC 51 percent of the company. The companies did not say whether GM would be paid for the stake.

The two automakers said they will launch a joint venture in India. It will include GM's two vehicle factories and powertrain facility in India and its nationwide distribution network. It also will sell Chinese-made GM cars.

"By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets," said SAIC chairman Hu Maoyuan in a joint statement.

GM's decision to surrender control of its main China operation and share access to India's fast-growing market is a sign of its struggle to raise financing, said John Bonnell, director of automotive forecasting at JD Power & Associates in Bangkok.

"The only motivation could be money — they need money," he said.

Bonnell said the move in China could reflect a shift in global strategy for GM following its decision to cancel plans to sell its Opel division in Europe. He noted that GM held onto its stake in the China joint venture rather than sell it to raise cash after it entered bankruptcy court protection.

"They were ready to give up on Opel, give up on Europe if you will, and maintain control in Asia," Bonnell said. "Now it looks like maybe they've decided to maintain their position in Europe at the expense of Asia.

Separately, the U.S. automaker and Suzuki Motor Corp. agreed Friday to end their manufacturing joint venture in Canada, leaving GM without a Japanese production partner after also severing manufacturing links with Toyota Motor Corp.

GM is now 60 percent owned by the U.S. government after being propped up with billions of dollars in loans from the taxpayer.

Like other global automakers, GM has said it wants to use India as a small car production base for export.

GM executives told The Associated Press in June that after the company filed for Chapter 11, regional businesses could no longer turn to their U.S. parent for funding. At the time, GM was in the midst of a $645 million expansion in India and Thailand.

GM has also run into trouble with its South Korean unit, GM Daewoo Auto & Technology Co., which saw its finances deteriorate due to a sharp drop in sales and large losses on currency hedging bets.

In October, GM pumped 491.2 billion won ($416 million) from its global operations into GM Daewoo, raising its stake to 70.1 from 50.9 percent through a rights issue that other shareholders, like the state-run Korea Development Bank, declined to participate in.

The deal with GM makes SAIC the first Chinese automaker to come to India. Analysts say the company would have to battle Indian consumer prejudice against Chinese-made goods.

Products made for China's diverse consumer market won't necessarily work in India, which remains dominated by small, affordable cars, though analysts say the company's Wuling buses could work in India.

GM itself has done a poor job at cracking the Indian auto market.

Deepesh Rathore, chief auto analyst for IHS Global Insight in New Delhi, said GM India is overstaffed, needs to expand its dealer network and invest in new models to compete with market leaders Maruti Suzuki and Hyundai.

"SAIC is a good partner. They can bring in the financial muscle," he said.

GM's sales in India rose about 10 percent last year, to 65,702 cars, but the company is still a distant fifth to Maruti Suzuki, which sold 711,818.

GM has invested over $1 billion in India, where it sells six models under the Chevrolet brand. The company's two automobile factories can churn out 225,000 cars a year, far more than it sells domestically.

"For them to take on a Chinese partner in India, which is a very nationally proud market, is very interesting. That tells me it's financially motivated," Bonnell said. "I don't think they're taking expertise from Shanghai over to India."

JD Power forecasts that car sales in India will grow from 1.7 million in 2008 to 3.2 million in 2015, while car sales in China will surge from 8.8 million to 16.0 million over the same period.

Kinetz reported from Mumbai. AP Business Writer Kelly Olsen in Seoul contributed to this report.