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Sources: GM in talks with SAIC to raise cash
(Agencies)
Updated: 2009-02-12 18:46 Signs of that brighter outlook spurred Chinese auto shares on Thursday, with both SAIC Motor and FAW Xiali Automobile Co up by their 10 percent daily limit. Analysts said, however, that a retreat from the China ventures by GM, which has provided key technology as well as marketing expertise, could hurt their prospects. "It won't look good for SAIC if its partner is pulling back," said Zhang Xin, an analyst with Guotai Junan Securities. GM under pressure In addition to their passenger car tie-up, GM and SAIC have seven other joint ventures in China, including an automotive finance company modeled after GMAC and a version of GM's OnStar navigation service for the Chinese market. In the early stages of the talks, GM signaled a willingness to consider selling other assets in China to SAIC, according to one of those with knowledge of the talks. In July, GM had set a goal of raising up to $4 billion through asset sales, but progress on potential deals has been stalled by the global downturn in sales and tight credit. Among the assets GM has been looking to sell are its Hummer SUV line, the Swedish brand Saab and a medium-duty truck business based in Flint, Michigan. But a deal to sell some of GM's assets in China could upstage those deals in size and significance at a time when a collapse in US sales has driven GM to the brink of failure. Although GM would be surrendering a claim on one of its most promising operations, a move to sell assets in China could also help insulate it against criticism that it was using US taxpayer funds to subsidize business overseas, a second person familiar with the talks said. GM and its joint ventures in China posted 6 percent sales growth in 2008, down from almost 19 percent the previous year but far outperforming GM's sales in its slumping home market. GM's US sales tumbled 23 percent in 2008, and some analysts have suggested that the automaker's uncertain financial prospects have started to weigh on its sales in China. (For more biz stories, please visit Industries)
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