This article discusses how partnerships in China have helped GM’s profits.

If General Motors believes in God, it must be thanking Him right now for China.

Mainland Chinese sales were by far the brightest spot in GM’s universe last year: sales in China rose 66 per cent while US sales fell by 30 per cent. One in four GM cars is now made in China. Even those cars made in Detroit were partly designed in Shanghai. GM managed to offload distressed assets to Chinese companies: the loss-making, environment-harming Hummer was sold to a previously unknown heavy equipment manufacturer, Sichuan Tengzhong [this sale was, however, blocked by the Chinese government in February 2010], and Beijing Automotive (BAIC) took some Saab technology off GM’s hands. Perhaps most importantly of all, though, China agreed last year to bankroll GM’s expansion in Asia.

In exchange for a deal to sell Chinese minicommercial vehicles in India, GM agreed to give up the 50-50 ownership of its leading mainland joint venture, Shanghai General Motors, ceding 51 percent majority control to its Chinese partner, Shanghai Automotive Industry Corp (SAIC). The Sino-American partnership said this would be only the first of many such deals. Will observers one day look back at that deal and say that was the day GM signed over its future to the Chinese? And does that deal demonstrate how China can save GM—or hint that it might gobble it up? “The quick answer is that Chinese consumers have already saved GM,” says Klaus Paur of TNS auto consultancy in Shanghai, referring to stratospheric Chinese auto sales last year.

Source: “Shanghai Tie-Up Drives Profits for GM,” by Patti Waldmeir, Financial Times, January 21, 2010. From the Financial Times © The Financial Times Limited 2010. All Rights Reserved.

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