June 1 (Bloomberg) -- General Motors Corp. may continue growing in China, its second-largest market, as ties with the city of Shanghai ease local drivers’ concerns about the automaker’s collapse into bankruptcy.

“In times of duress, it’s nice to have a 50-50 partnership with a very wealthy and powerful city,” said Michael Dunne, managing director of JD Power & Associates China, an automotive consultant. Also, “Chinese consumers are familiar with the brand ‘Shanghai GM,’ not ‘GM Shanghai,’” which will give “them a sense of stability.”

GM, the largest overseas automaker in China, will file for bankruptcy protection today after failing to meet a U.S. government-imposed deadline for reorganizing debt, the Obama administration said yesterday. Still, Shanghai-controlled SAIC Motor Corp., GM’s China partner, rose 3.2 percent in the city on speculation sales will withstand the bankruptcy.

GM China “will definitely continue to expand,” said John Zeng, a senior market analyst at IHS Global Insight. “Sales are good and their models are very attractive.”

Shanghai General Motors Co., equally owned by SAIC Motor and GM, makes models including Buick Excelles and Cadillac SLS luxury sedans. SAIC-GM-Wuling Automotive Co., which builds Wuling brand minivans, is 34 percent-owned by GM and 50.1 percent held by SAIC Motor, China’s biggest domestic automaker. Wuling Motors, based in southwestern China’s Guangxi region, owns the rest.

May Sales Rise

Zhu Xiangjun, a SAIC spokeswoman, declined to comment on GM’s plans to file for bankruptcy. Johan Willems, a Shanghai- based spokesman for GM’s Asian operations, also declined to comment. GM China President and Managing Director Kevin Wale will hold a press conference tomorrow in Shanghai and GM Asia Pacific President Nick Reilly will separately hold a conference call with reporters.

GM’s sales with SAIC Motor jumped more than 50 percent in May to 56,011 vehicles as government stimulus measures helped spur demand, the joint venture said in a statement today. The Detroit-based carmaker’s first-quarter sales plunged 50 percent in North America.

GM’s operations in China are profitable and can finance future growth themselves, “likely” including a new factory, Reilly said in April. The automaker, which sold its first car in China in the 1920s, had said that it expects to double annual Chinese vehicle sales to more than 2 million over the next five years.

“Shanghai GM is certainly capable of developing itself independently,” Zeng of IHS Global Insight said. “It’s a company that has a very good financial position.”

Future Growth

SAIC Motor, which also makes cars with Volkswagen AG, has more than doubled this year in Shanghai trading on speculation that government measures will help spur vehicle sales. The carmaker climbed to 15.06 yuan today.

Still, while Shanghai GM’s sales may ride out a short GM bankruptcy, a protracted restructuring could hamper future growth by hindering technology research and the development of new products.

“It’s impossible that there will be no impact,” said Yu Bing, an analyst at Ping An Securities Co. in Shanghai. “But, it’s more difficult to assess the extent of it.”

China Employees

GM, which employs more than 25,000 employees in China, sold 1.09 million vehicles in the country last year. That’s 13 percent of its global sales and about 75 percent of Asia sales. Across the Asia-Pacific region, the company has factories in six countries, including South Korea, Thailand and Australia.

In April, the automaker sold 151,084 vehicles in China. Industrywide sales jumped 25 percent to 1.15 million. In the first four months of the year, China’s vehicle sales rose 9.4 percent to 3.83 million, compared with a 37 percent drop to 3 million in the U.S.

GM China has introduced five new or revamped models in 2009. Three more -- a revamped Buick LaCrosse, the Buick Regal 2.0 Turbo and the Cadillac SRX -- are due to follow.

The country’s continued economic growth and government steps to boost auto sales may help demand for the vehicles, even without support from Detroit.

“The potential here is so great,” said Liu Lixi, a Beijing-based analyst at Northeast Securities Co. “China has also put spurring auto sales at the top of its agenda, which will continue boosting GM’s performance.”

To contact the reporter for this story: Stephanie Wong in Shanghai at swong139@bloomberg.net

Last Updated: June 1, 2009 05:18 EDT