After reading “American Wheels, Chinese Roads”, I decided to look a little bit more into the sale by GM of the controlling percentage in the joint venture. Dunne makes this sale a key point in the conclusion of his book. He believes that “GM’s sale of 1 percent of equity to SAIC in 2009 was an ominous event, confirming Chinese control of the Shanghai-GM joint venture”.
Today, of course, General Motors has already repurchased that 1% stake it sold in ’09 for $119 million. This purchase put the equity stake again at a 50/50 split. What Dunne didn’t mention, is that not only did GM walk away with $84.5 million in its attempt to avoid bankruptcy, but the sale also lubricated GM’s attempt to obtain $400 million in a line of credit from Asian banks. This meant that they would not need to utilize as many “bailout bucks” as previously thought to their Asian operations.
Still, the SAIC retains 51% of the sales arm of the company, where the revenue is booked. I think it will be very interesting to see how this relationship develops over the next decade, and see exactly how this fairy tale story of a joint venture between a powerful US corporation and a Chinese partner ends.