China’s state-backed SAIC (Shanghai Automotive Industries Corp) has expressed interest in buying GM shares offered for sale at the U.S. automaker’s IPO, expected to take place this coming November.
Neither General Motors nor the Treasury Department has issued any comments on alleged talks being held between GM and its Chinese joint venture partner, SAIC. An emailed statement by SAIC simply states that, “As a strategic partner of GM, SAIC-GM hopes for a successful IPO.”
On Friday, the Treasury Department issued an official statement clarifying the rules to be applied to GM’s forthcoming IPO. The statement indicates that access to the stock sale will be provided to all potential investors who will be “sought across multiple geographies with a focus on North American investors” and that, “a large and diverse group of institutional investors will be offered an opportunity to participate”.
Following its $50 billion bankruptcy bailout of General Motors last year, the U.S. government currently owns 61% of the company. GM has repaid a small part ($6.7 billion) of the loan, and the Treasury Department is hoping to recover the remaining amount through the automaker’s upcoming IPO. General Motors is also looking forward to ending government ownership of its shares. The stock sale will also provide funds necessary for investment.
However, as GM CEO Daniel Akerson pointed out, revenues from a single stock sale will not be sufficient to repay GM’s debt to the government. Although General Motor’s financial performance during the first half of 2010 was reassuring (the company made $2.2 billion), several IPOs will be needed to end government investment in GM and return taxpayer money that was channeled into the company.
There is nothing new about foreign investment in U.S. firms. Regardless of how politically unpopular it may be, Chinese investment in General Motors, could benefit both the Detroit automaker and the government.