GM talking with China's SAIC to raise cash

By Soyoung Kim and Kevin Krolicki

DETROIT (Reuters) - General Motors Corp GM.N has held talks with China's SAIC Motor Corp (600104.SS) about selling part of its stake in their joint venture or other assets as the U.S. automaker races to raise cash, two sources familiar with the discussions said.

GM approached SAIC Motor in recent weeks with an offer to sell some of its stake in their 50-50 joint venture that builds and markets Buick, Cadillac and Chevrolet models in China, according to the sources.

The sources requested anonymity because they were not authorized to discuss the preliminary talks.

Such a deal would make GM a minority partner at its decade-old flagship venture in China, Shanghai General Motors Ltd, considered to be one of the remaining crown jewels in its global operations.

The discussions with SAIC Motor are taking place as GM pushes to secure big concessions from its bondholders and major union to show it can become viable under a $13.4 billion U.S. government bailout.

GM has until Tuesday to submit a new restructuring plan to the U.S. government detailing the progress it has made in cutting costs and shoring up its balance sheet.

GM and SAIC Motor had no comment.

"It is feasible that GM could cut its stake in Shanghai GM to help raise money," said analyst John Zeng of IHS Global Insight. "GM could manage to buy back the shares later if it can stave off bankruptcy, as China is one of its few bright spots in the world, if not the only one."

Shares of both SAIC Motor and FAW Xiali Automobile Co (000927.SZ) rose by their 10 percent daily limit. Analysts said GM's need for cash could provide those companies with a good expansion opportunity.

But one analyst said any retreat from its China ventures by GM could also hurt their prospects since the U.S. automaker has provided key technology and marketing expertise.

"It won't look good for SAIC if its partner is pulling back," said Guotai Junan Securities analyst Zhang Xin.

UNDER PRESSURE

Besides their passenger car tie-up, GM and SAIC have seven other joint ventures in China, including an automotive finance company modeled after GMAC and a version of GM's OnStar navigation service for the Chinese market.

In the early stages of the talks, GM signaled a willingness to consider selling other assets in China to SAIC, according to one of those with knowledge of the discussions.

It was not immediately clear how much GM could look to raise from any deal to sell assets in China.