GM's IPO Included Selling Holding of $500 Million to Chinese Partner SAIC

General Motors Co. sold a $500 million stake in its initial public offering to Chinese partner SAIC Motor Corp., cementing ties that have helped the American company boost sales in the world’s largest auto market.

SAIC bought the 0.97 percent stake “on the basis of a good strategic partnership between the two” and its “confidence in GM’s development prospects,” the Shanghai-based carmaker said in an e-mailed statement yesterday. The company will raise funds for the investment from Hong Kong financial markets, it said.

The share purchase follows Detroit-based GM saying this month that it will raise its stake in SAIC-GM-Wuling Automotive Co., one of the companies’ two partnerships in China, to 44 percent from 34 percent. GM, which went bankrupt last year after almost a century on the New York Stock Exchange, returned to public trading yesterday following an initial public offering that raised more than $20 billion.

“Shanghai Auto, the most successful automotive company in China, who is our partner in China, is absolutely critical to GM’s success,” Dan Akerson, GM’s chief executive officer said in a Bloomberg Television interview in New York yesterday. “I think the pairing and the strategic investment by SAIC, and the relationship that we have is a strong positive, a strong plus for General Motors.”

GM closed 3.6 percent higher at $34.19 overnight, after climbing 9.1 percent in the first hour of New York trading. SAIC shares are rose 1.4 percent to 18.26 yuan as of 9:59 a.m. in Shanghai. The stock has declined 9 percent this year.

China is GM’s biggest market by unit sales and its alliance with SAIC is the biggest auto-producing venture in the nation.

Strong Partnership

The U.S. carmaker filed for an IPO in August as the U.S. government seeks to pare the 61 percent stake it gained in the company through its bankruptcy and $50 billion taxpayer bailout last year.

GM reported third-quarter net income of $2.16 billion last week, bringing the automaker’s earnings this year to $4.77 billion. That tops the $4.46 billion profit by Toyota Motor Corp., the world’s largest automaker, according to data compiled by Bloomberg.

SAIC owns 50.1 percent of SAIC-GM-Wuling, maker of the 30,000 yuan ($4,521) Sunshine minivan, and 51 percent of Shanghai GM, which builds cars such as Chevrolet Lova compacts and Buick sedans with the U.S. automaker.

International Acquisitions

The Chinese automaker has made international acquisitions before with SAIC buying a 49 percent stake in South Korea’s Ssangyong Motor Co. for $500 million in 2004. The Pyeongtaek- based Ssangyong, which entered bankruptcy protection last year after the global recession squeezed auto sales, may be acquired by India’s Mahindra & Mahindra Ltd.

SAIC also owns the British Rover and MG sports-car brands and renamed Rover as Roewe in China after taking over the rights in 2005.

GM and its Chinese joint ventures sold 1.97 million vehicles through October, a 36 percent increase from a year earlier, making it the most successful car alliance in China. That compares with second-ranked Volkswagen AG, which delivered 1.48 million cars through September.

GM signed a $1.6 billion deal in 1997 with SAIC to build Buick Regal and Century sedans in its first joint-venture sedan plant in China.

‘Good Business’

“With over 60 percent of GM’s vehicle sales coming from outside the U.S. market, it makes sense for foreign organizations to take a stake in a company that does so much business in their backyards,” Rebecca Lindland, an analyst with IHS Automotive, said in a research note this week. “This is good business for GM as well as it makes the company less of a ‘‘foreign’’ operator in the various global markets.”

Even so, GM earns more profit in the U.S. than in China. GM’s North America operations had profits before interest and taxes of $2.1 billion in the third quarter, while the company’s international operations, including China, earned $646 million.

The carmakers announced Nov. 3 they will together develop alternative-energy vehicles as China, the world’s biggest oil importing nation, seeks to reduce its dependence on the fossil fuel. They plan to introduce the battery-powered Chevrolet Volt in China next year.

GM and SAIC, developing a new engine and transmission system together, also have plans to open four facilities in China by 2011 to sell and service used cars, the U.S. company said in an Oct. 28 statement.

GM plans to introduce six SAIC models in India in two years, Karl Slym, managing director of the U.S. company’s local unit, said in Mumbai yesterday. The company aims to spend as much as $500 million on new models and expanding capacity, he said.

--Liza Lin in Shanghai, with assistance from Tian Ying in Beijing, David Welch in Detroit, Craig Trudell in New York and Siddharth Philip in Mumbai. Editors: Ian Rowley, Kae Inoue, Vipin V. Nair

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at +86-21-6104-7010 or llin15@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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