SAIC Motor Corp in talks with General Motors over 1% stake

Potential deal combined with US treasury-backed IPO could place 4% of firm in Asian and Middle Eastern ownership

Edward Helmore in New York
The Guardian, Monday 15 November 2010

The General Motors headquarters in Detroit, Michigan. Any deal with SAIC would inflame trade sensitivities. Photograph: Jeff Kowalsky/Reuters

In a deal certain to inflame existing trade sensitivities, China's biggest carmaker SAIC Motor Corp is reported to be in negotiations with General Motors for a 1% stake in the US carmaker.
In addition to the $500m deal, a US treasury-backed IPO next week – designed to reduce the government's 61% stake in the manufacturer – could place 4% of the firm in Asian and Middle Eastern ownership.
The deals are politically sensitive and follow several transactions in which significant stakes in US firms, including Morgan Stanley, Blackstone and IBM, have been transferred to Chinese government-backed ownership.

The SAIC-GM deal – which was first reported by the Wall Street Journal – as well as the IPO offering, are part of US efforts to recoup some of the $50bn of taxpayers money it spent on the GM bailout two years ago.

Last week GM announced it is on track for its first profitable year since 2004. Despite the unpopularity of such deals domestically, China has the world's biggest and fastest-growing car market, and GM executives have been actively courting Asian sovereign fund investment.

GM recently overtook Volkswagen as the top-selling foreign brand in China and will this year sell more vehicles there through a preexisting partnership with SAIC than in the US itself. US sensitivities around the issue of a Chinese stake reach the highest levels, and officials from the governments of both nations have been involved in negotiations, sources said. Close ties between the two carmakers, in terms of technology-sharing and ownership, also signal SAIC's ambitions to move beyond the Chinese market.