Will GM (GM) Get The Cash It Needs From China?

Maybe GM (GM) won’t have to turn to Congress for a big rescue package. Putting in money may be of benefit to a company outside the US government.

One of China’s largest car companies is looking at GM with an interest in getting a large piece of a joint venture in the world ‘s most populous country. Given that a China-government backed firm, Chinalco, just put $19.5 billion into Rio Tinto (RTP), a long-term gamble on GM may be another move to buy valuable assets for little money and benefit when the economy recovers.

Chinese car company SAIC is in conversations with GM about making a major investment. According toReuters, “General Motors Corp has held talks with China’s SAIC Motor Corp about the possible sale of a share of GM’s stake in their joint venture or other assets as the U.S. automaker races to raise cash.”

A year of so ago, GM would never have made the sale. China is the second largest car market in the world, and has been the fastest growing. In January more vehicles were sold in China than the US.

If GM gives up most or all of its joint venture with SAIC for cash it needs today, the car company may help itself short-term, but it will be walking away from one of its best chances to have a profitable future.

Douglas A. McIntyre