Opel Deal May Be Finalized This Week
Honest question - since Opel will continue, can't we get engine parts for our Saturn Sky?
WSJ Article below:
By PATRICIA JIAYI HO
SHANGHAI -- General Motors Co. Chief Executive Frederick "Fritz" Henderson, on his first trip to China since GM emerged from bankruptcy protection in July, expressed confidence Tuesday that GM will be able to unload its Hummer and Opel brands soon.
It is "quite possible" the company will finalize the sale of a majority stake in its Adam Opel GmbH unit this week, Mr. Henderson said.
In addition, he said the buyer of its Hummer truck brand, Sichuan Tengzhong Heavy Industrial Machinery Co., is "confident and hopeful" that the deal, signed on Friday, will receive approval from Chinese government.
GM said last month it would sell its Opel unit, as well as sister brand Vauxhall, to Austrian-Canadian car-parts maker Magna International Inc. and Russian bank OAO Sberbank.
Terms of Tenzhong's deal for Hummer haven't been disclosed but several people familiar with the matter have said that Tengzhong will pay $150 million for Hummer. In bankruptcy filings, GM estimated the value of the brand, known for its gas-guzzling vehicles, at $500 million.
Mr. Henderson declined to confirm the $150 million figure Tuesday. He said GM is satisfied with its "well-negotiated" agreement with Tengzhong.
The massive SUVs hardly fit with China's strategy to improve energy efficiency, and Chinese regulators will also likely consider whether the Hummer brand can become profitable before approving the deal. GM missed a Sept. 30 goal of finalizing a deal to sell Hummer to the Chinese manufacturer.
Mr. Henderson said GM has been in dialogue with Tengzhong on the outlook for regulatory approval from China. "They certainly feel strongly that this project should receive approval."
Even if the deals go through quickly, the U.S. auto maker is falling short on other goals. After buyout programs fell short it has about 10,000 more workers now than it had planned to have by the end of this year. A plan to sell Saturn to Penske Automotive Group fell through after Penske failed to find a company to build the vehicles once GM stops making them.
China, on track to overtake the U.S. as the world's largest auto market this year, plays an increasingly important role in GM's global operations, Henderson said.
Auto makers in China have benefitted from the country's relatively more buoyant economy as well as government incentives aimed at boosting vehicle sales. GM executives have repeatedly extolled China's significance but have not quantified how much of its revenue now comes from the country.
GM's sales in the January-September period in China totaled 1.29 million units, up 55.6% from a year earlier. GM said in early September it expected its sales in China to grow by more than 40% this year.
China's passenger vehicle sales in September rose 84% from a year earlier to 1.02 million units, the China Association of Automobile Manufacturers said Tuesday. Total vehicle sales during the January-September period rose 34% from a year earlier to 9.66 million units. The association expects overall auto sales for the whole year to exceed 12 million.
Henderson said he expects China's auto market to continue to grow at a "significant pace," and the strong auto sales in the country so far this year are "not a blip."
Henderson said Tuesday GM plans to launch a new Chevrolet Sail by the Lunar New Year, designed and developed primarily by the Pan-Asia Technical Automotive Center Co., or Patac, an automotive design and development joint venture between GM and SAIC Motor Corp. in Shanghai. The Lunar New Year holiday will start Feb. 14.
Henderson didn't say whether GM is considering exporting the compact car but said it "has been developed for customers in China and has great potential for other customers in emerging markets." GM said in August that its venture with Chinese partners SAIC and Wuling Automobile Co. will expand exports of two micro-minivans designed and produced in China, apparently part of a wider strategy to use China as an export hub.
Other auto makers have come up with small no-frills cars targeted to emerging markets. GM's Sail follow such cars as Ford Motor Co.'s recently unveiled Figo, to be made in India and exported to South Africa and other countries, as well as Renault SA's low-cost Dacia models.
As sales volume in China grows, GM also sees the country playing a more central role in research and development in areas such as alternative energy.
"Patac's capability in design and development of cars has grown substantially over the last few years," said Nick Reilly, GM's head of international operations. "My belief is that China will probably be the country that enforces or develops electric vehicles, small electric cars faster than anywhere else in the world because of the demand for those in the cities and the desire of the government to produce those types of vehicles."
Earlier this year, GM announced it is basing all its international operations in Shanghai.
"Shanghai and China will become a very important source of technology that will be used elsewhere in the world," Reilly said at the press conference.
GM has launched two hybrids in China, the Buick LaCrosse Eco-Hybrid and the Cadillac Escalade 2-Mode Hybrid, and will introduce the Chevrolet Volt in China in 2011.
Henderson also said GM plans to conduct an initial public offering in the second half next year. The timetable represents a slight delay from his earlier forecast, during an interview on CNBC in August, for the IPO to likely take place after the first quarter of 2010..
The company needs to prepare performance targets and financial statements for the IPO, he said.
"That process we think will take through the first half of next year."
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