Mumbai: General Motors Co. has raised its stake in an equal Indian joint venture with Shanghai Automotive Industries Corp., or SAIC, to 93%, regaining complete control.
The US carmaker had been forced to sell a 50% stake in the Indian unit to the Chinese company ahead of a 2009 bankruptcy filing.
“We have increased our stake to 93%. This is based on our current financial conditions,” Lowell C. Paddock, General Motors India Pvt. Ltd’s president and chief executive, said in an interview on Tuesday, without divulging more details. “We have put in more equity, which has increased our stake. This will have no implications on our partnership in any other place other than India.”
In 2009, the Detroit-based auto maker sold the 50% stake to SAIC for Rs 2,350 crore as part of it efforts to revive the company.
“There could be many reasons behind this move (to buy back the stake). One of them could be that GM may not like SAIC’s involvement in (its) Indian affairs,” said Deepesh Rathore, managing director of IHS Automotive, a research firm. “Secondly, the JV (joint venture) in India was becoming redundant with SAIC shelving its plans to launch light trucks in the country. So, it may just be getting royalty from GM on its cars.”
Together, the two partners have invested $1 billion in the country. The money was invested in General Motors’ second plant in Talegaon to roll out light commercial vehicles and cars from SAIC’s portfolio.
In 2011, General Motors’ net profit grew 62% to $7.6 billion from the year before—a remarkable turnaround from a hopeless situation three years earlier. GM has repaid $24.1 billion of the $49.5 billion in federal government aid it received. The repayments include proceeds from the automaker’s public stock offering.
A person familiar with the latest development said the move in India follows General Motors’ global operations regaining financial muscle.
“Last year they have made some good profits. They could have an arrangement with SAIC that at a later stage GM will buy back its stake,” said this person. “The move will allow the company to have more directors on the board and thus more controlling powers.”
Globally, SAIC and GM-US have an equal joint venture investment company called General Motors SAIC Investment Ltd that’s based in Hong Kong.
Powell said General Motors hasn’t bought SAIC’s entire stake in the Indian joint venture because the Chinese company is a valuable partner and GM has confidence in its capabilities. In fact, GM India is set to launch at least three vehicles from SAIC’s portfolio in India in the coming months with Sail-Uva, a hatchback, being the first one.
“It’s a clear indication of their power that we have grown so successfully in China and has 50% market share in the small/mini segment there. We continue to remain best of partners. There will be no changes in plans and we plan to go ahead with SAIC plans,” Paddock said.
GM leads the car segment in China. General Motor’s international operations, of which China is the main component, had operating profits of $1.9 billion last year, compared with $2.3 billion in the prior year.