GM says in talks with China's FAW on partnership

SHANGHAI Thu Feb 5, 2009 2:07am EST

A General Motors logo is seen at a car dealership in Toronto December 12, 2008. REUTERS/Mike Cassese

A General Motors logo is seen at a car dealership in Toronto December 12, 2008.

Credit: Reuters/Mike Cassese

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SHANGHAI (Reuters) - General Motors (GM.N) is holding discussions with major Chinese automaker FAW Group to form a partnership for light commercial vehicles, banking on government policy support to drive demand for pick-up trucks and vans.

Henry Wong, a GM China spokesman, told Reuters on Thursday the two parties had registered a name with the State Administration for Industry and Commerce, but declined to specify the nature of the partnership.

"Joint venture is far from complete, but the registration of the name is just one of the processes," Wong said when asked whether the partnership will lead to a full-fledged joint venture.

"We still have a lot of work to do before the joint venture becomes a reality."

GM already makes light commercial vehicles in China in a three-way tie-up with SAIC Motor (600104.SS) and Liuzhou Wuling Automobile.

It also operates a car manufacturing venture in Shanghai with SAIC, China's largest auto maker.

GM, which now holds 34 percent of SAIC-GM-Wuling, has been seeking to raise its stake in the tie-up due to robust demand for cheap pick-up trucks and vans in small cities and rural areas even though car sales growth lost steam last year amid a slowing economy.

Sales at GM's commercial tie-up rose 17.9 percent year on year to 647,296 units last year, accounting for nearly 60 percent of its overall China sales, while its car venture moved 445,709 vehicles, down 7.03 percent.

"The commercial vehicle segment is getting more important for GM as consumers postpone buying big-ticket items like cars," said Zhang Xin, a senior analyst with Guotai Junan Securities.

"Government subsidies could further drive up demand for pick-up trucks and minivans."

Cars sales growth in China slowed to a single-digit rate in 2008 for the first time in at least 10 years as the global financial crisis struck home.

The government had in January unveiled a wide range of policies, including subsidies to owners who trade their high-emission farm vehicles for more fuel-efficient and clean ones, to boost the domestic auto industry, one of the pillars of the world's third largest economy.

FAW, one China's three biggest automakers, operates car manufacturing ventures with Volkswagen (VOWG.DE) and Toyota Motor (7203.T).

(Reporting by Fang Yan; Editing by Jonathan Hopfner)

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