(Repeats story from Friday, Sept. 17)
* GM IPO preparation entering politically charged phase
* SAIC, GM had informal contact about IPO stake-sources
* GM planning meetings with sovereign wealth funds-sources
* SAIC separate from approach to "cornerstone" investors
By Kevin Krolicki, Clare Baldwin and Fang Yan
DETROIT/NEW YORK/BEIJING, Sept 17 General
Motors Co [GM.UL] is moving into a new and more politically
charged phase of preparations for its landmark initial public
China's top automaker, SAIC Motor Corp (600104.SS), has
reached out to GM to explore the prospect of taking a stake in
the U.S. automaker when it goes public this fall, four people
with knowledge of the matter said.
At the same time, GM and its advisers are making
appointments to meet with sovereign wealth funds over the next
few weeks to sound out their interest in committing to buy and
hold major stakes as so-called "cornerstone investors," one
U.S. officials have taken a cautious approach to foreign
investor participation in the GM IPO because of the possibility
of any such investment -- perhaps by a state-funded Chinese
automaker in particular -- to trigger a political backlash.
As of earlier this month, the U.S. Treasury had not yet
decided how to handle the question of potential stakes in GM by
sovereign wealth funds, a move that would help create demand
among other investors, one source said.
A spokesman for the U.S. Treasury declined to comment on
preparations for the IPO. But Treasury late on Friday night
posted public guidance online that said IPO investors will be
sought "across multiple geographies with a focus on North
American investors" and that the investor pool would be large
and diverse, including U.S. retail buyers.
The U.S. Treasury said that it had also given guidance to
GM and the underwriters on principles for the IPO but would not
be involved in discussions about how shares are allocated.
A GM spokesman could not be reached for comment but GM has
repeatedly declined to comment on the IPO, citing securities
Cornerstone investors typically commit to a relatively
large stake to demonstrate confidence in an IPO. In the GM
deal, cornerstone investors would likely be approached for
stakes of several hundred million dollars to a billion dollars
each, one person with direct knowledge of the preparations
The size of the GM IPO has yet to be determined but
estimates range from $10 billion to $20 billion depending on
how aggressively the Treasury decides to sell its stake and the
strength of the markets.
The U.S. government pumped $49.5 billion of taxpayer money
into GM in a still-controversial bailout that kept the
automaker from liquidation but earned it the nickname
"Government Motors" from critics.
Ahead of November congressional elections, the Obama
administration has been working to convince voters that the
2009 rescue packages for GM and Chrysler spared the auto
industry an even more wrenching downturn.
The U.S. Treasury is expected to take a loss on the first
offering of GM stock although subsequent offerings of the
government's holdings may be profitable, sources have said.
ROUGH ROAD AHEAD?
The contact between state-backed SAIC -- which has a
13-year relationship with GM -- and GM has been informal and
the expression of interest by the Chinese automaker could hit a
quick dead end if the U.S. government objects to the move,
several of the sources said.
In its informal contact with GM, SAIC has expressed an
interest in acquiring a "single digit" ownership stake -- less
than 10 percent -- in GM, one person with knowledge of the
Because the SAIC contact with GM remains private and
preparations for GM's IPO are covered by strict U.S. securities
regulations regarding disclosure, none of those involved in the
discussions could be named.
SAIC Chairman Hu Maoyuan has said that the Chinese
automaker had not made any decision about a GM investment and
would seek a "win-win" arrangement, a spokesman for the
In addition to the potential for pushback from the U.S.
government, SAIC has been tentative in its approach to the GM
deal because its first major overseas investment turned into a
costly distraction, one source said.
SAIC bought South Korean automaker Ssangyong (003620.KS) in
2004 for $552 million but failed to reverse a slide that sent
it into bankruptcy in early 2009.
In a deal struck during its slide toward bankruptcy, GM
sold a 1 percent ownership stake in Shanghai GM to joint
venture partner SAIC in exchange for the help of the Chinese
automaker in securing a $400 million line of credit.
That deal gave SAIC a controlling 51 percent stake in
Shanghai GM. The two companies are also allied in a joint
venture targeting the Indian market, and SAIC is a partner with
GM in a third joint venture with Wuling to make small vans and
work trucks in China.
China emerged in 2009 as the world's largest auto market,
overtaking the United States.
In the second quarter, GM sold 586,000 cars in China
through its joint ventures compared with 708,000 Chevy, Buick,
GMC and Cadillac models in North America.
GM said this week it expects to sell 10 to 15 percent more
vehicles in China next year, growth that would give it sales of
more than 2 million vehicles.[ID:nTOE68G01Z]
(Reporting by Kevin Krolicki in Detroit, Clare Baldwin in New
York, Fang Yan in Beijing, Soyoung Kim in New York and Philipp
Halstrick in Frankfurt; Editing by Gary Hill)