UPDATE 2-GM near deal to sell China venture control-sources

Thu Dec 3, 2009 3:46pm EST

Related Topics

* GM would sell 1 pct stake in GM-SAIC China joint venture

* GM to transfer half of India business to SAIC in new JV

* GM would have option to buy back China venture stake (Adds GM sales in China, India)

By Soyoung Kim and Kevin Krolicki

DETROIT, Dec 3 (Reuters) - General Motors Co [GM.UL] is nearing a deal to sell majority control of its China venture and transfer half of its India operations to Chinese partner SAIC, sources with knowledge of the situation said on Thursday.

The pending deals would give GM an infusion of cash as it restructures after emerging from bankruptcy in July -- and reshape the U.S. automaker's profile in two of the world's fastest-growing markets.

The deals with SAIC also come at a time when GM has opted to retain and turn around its European Opel operations in a restructuring it estimated would cost about 3.3 billion euros, reversing a decision to sell a controlling stake in the unit.

GM had a cash hoard of almost $43 billion at the end of September thanks to $50 billion of U.S. government support that has made the U.S. Treasury a 61-percent owner, but the company has made it a priority to repay debt to U.S. taxpayers quickly, possibly as early as June.

Under the deal expected to be announced shortly, GM would sell 1 percent of its 50-50 China joint venture to SAIC Motor Corp (600104.SS), China's biggest automaker, two sources briefed on the deal told Reuters on the condition of anonymity because the talks are private.

That transaction would give SAIC a controlling stake in GM's fastest-growing market. SAIC could pay up to 20 percent of the joint venture value to take control, while GM would have the option of buying back the stake later at a premium, the sources said.

GM was not immediately available to comment. SAIC declined to comment.

SAIC suspended trading in its shares on the Shanghai stock market on Thursday pending an announcement on what it called a "major asset restructuring". The automaker said it would hold a board meeting before Dec. 9 to discuss the move.

In a related pending deal, GM would transfer half of its operations in India to SAIC by setting up a 50-50 joint venture with its China partner, one of the sources said.

That transaction will require approval from Indian government regulators, the source said.

The pending deals come almost a year after GM held an initial round of discussions with SAIC to sell part of its China joint venture stake or other assets to raise cash in a restructuring that was then aimed at avoiding bankruptcy.

Sources briefed on the matter had told Reuters in February GM was in wide-ranging discussions to sell assets to SAIC.

Discussions about selling GM's China joint venture stake in early 2009 were scuttled under former Chief Executive Rick Wagoner. His successor, Fritz Henderson, resigned in a split with GM's board on Tuesday.

Chairman and Acting Chief Executive Ed Whitacre has said GM's priority will be to push faster toward returning to profitability and repaying U.S. taxpayers.

BRIGHT SPOTS

China's auto market has been a rare bright spot for GM this year thanks to a raft of government incentives and aggressive cuts in sales taxes on small cars that have boosted sales.

Through October, sales at its Shanghai GM joint venture with SAIC were up 46.5 percent at 548,707 vehicles in 2009 from last year. The decade-old flagship venture with SAIC sells passenger cars under Cadillac, Buick and Chevrolet brands.

GM in its global restructuring opted to retain the Buick brand because of its popularity in China while it was closing or selling other units.

The China results stand in contrast to GM's home U.S. market, where sales were down 32 percent through November at nearly 1.9 million vehicles.

The GM-SAIC partnership is one of the most successful tie-ups between a foreign and local automaker in China, helping both be dominant players in a fiercely competitive market with Volkswagen AG (VOWG.DE), Toyota Motor Corp (7203.T) and Ford Motor Co (F.N).

GM and SAIC have several other joint ventures in China as well, including an automotive finance company modeled after GMAC and a three-way commercial vehicle tie-up with Lizhou Wuling Automobile.

GM's joint ventures in China sold a combined 1.46 million units through the first 10 months of 2009.

General Motors India, the automaker's wholly owned subsidiary launched 12 years ago, sold 65,702 vehicles last year. It expects sales to grow to 75,000 in 2009. (Reporting by Kevin Krolicki in Los Angeles and Soyoung Kim in Detroit, additional reporting by David Bailey, editing by Matthew Lewis, Phil Berlowitz) ((soyoung.kim@thomsonreuters.com; + 1 313 967 1903; Reuters Messaging: soyoung.kim.reuters.com@reuters.net))

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