General Motors Aims to Raise Stake in China Venture

By Tian Ying and Winnie Zhu

Nov. 9 (Bloomberg) -- General Motors Corp., the biggest overseas automaker in China, is in talks with a local partner to increase its stake in a venture that produces vans and light trucks under the Wuling brand.

The U.S. automaker is seeking to buy additional shares in SAIC-GM-Wuling Automobile Co., Hu Maoyuan, chairman of SAIC Motor Corp., said yesterday in an interview in Tianjin. SAIC is the majority shareholder of the venture with 50.1 percent, GM owns 34 percent and Liuzhou Wuling Motors Co. holds the rest.

GM is seeking to boost market share in the world's fastest- growing major economy, where the venture based in southern Guangxi province accounts for about half its local sales. GM said last week that it may not have enough cash to keep operating this year after reporting a $4.2 billion third-quarter operating loss.

``Given the lobbying power of both SAIC and GM, the American carmaker will sooner or later get more shares,'' Ricon Xia, an analyst with Daiwa Associate Holdings Ltd. in Shanghai, said today. ``This venture is a vital part of GM's China operation.''

Henry Wong, GM's Shanghai-based spokesman, declined to comment, saying all business discussions with its partners are confidential and the company has nothing to announce.

SAIC's Hu didn't provide any details or disclose how large a stake Detroit-based General Motors is seeking.

``GM and our partner in Guangxi are still discussing how to settle the share transfer,'' Hu said. ``We won't give up any of our stake.''

Big Three Losses

Combined first-half losses at GM, Ford Motor Co. and Chrysler LLC, the three largest U.S. automakers, totaled $28.6 billion. The companies are seeking $50 billion in federal loans to help them weather the worst market in 25 years. New vehicles sold at a seasonally adjusted annual rate of 10.6 million in October, the lowest since 1983.

A U.S. rescue package for the so-called Big Three is likely before President George W. Bush leaves office in January, Dennis Virag, president of Automotive Consulting Group in Ann Arbor, told Bloomberg Television last week.

Democratic congressional leaders have urged U.S. Treasury Secretary Henry Paulson to provide temporary aid to the U.S. auto industry from funds available in a $700 billion rescue bill passed last month.

`Essential to Economy'

``A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's workforce,'' House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in the letter to Paulson today.

GM sold 1.03 million vehicles in China last year, about 11 percent of its global total. The company is the biggest overseas automaker in the country in terms of total sales. Combined nine- month vehicle sales at its Chinese ventures rose 9.3 percent to 785,144, according to Bloomberg calculations.

``The current financial situation may actually help GM push forward the deal,'' Daiwa's Xia said. ``Especially given the Chinese government's willingness to help the U.S. fend off the financial crisis that has also hit GM heavily.''

To contact the reporter on this story: Tian Ying in Beijing on ytian@bloomberg.net