Friday, October 1, 2010

Will Government Motors Be Sold To China?


I came across an interesting article which posits that the General Motors stock held by the US Government may be sold to the Chinese later this year.

After spending billions of dollars to bail out General Motors Co. last year, the US government is eager to unload its 61% stake of the now profitable automaker. That unloading could happen as soon as November, when GM’s anticipated IPO is launched to the general public.

One company showing increased interest in the pending IPO is GM business partner, and Chinese company, SAIC Motor Corp. According to the Wall Street Journal, SAIC has been central to GM’s success in China and is expected to continue to play a major role in future success. In fact, GM’s sales in China rose 19% for the past year, ending in August. That’s contrary to a struggling US and European market.

The sticky issue is the potential political backlash caused by selling an American icon, which was rescued from failure by the American taxpayers, to a non-American company. When the general public is allowed to purchase stock, buying is not limited to domestic investors. Anyone from foreign companies to sovereign wealth funds can purchase shares.

The political backlash will be media driven and unwarranted, which is why the IPO will not be released until after the mid-term elections. GM was purchased by the Treasury when its stock price was basically worthless, it is now profitable and should be sold to the highest bidder.

Regardless of who purchases the shares, the Treasury will not unload all of its stock at once. In response to the Treasury’s one time sale, the NY Times quoted GM CEO, Dan Akerson as saying, “Not going to happen…I think that’s unrealistic.” How long it takes for the government to divest the rest of its holdings will, in part, be determined by GM’s success, Mr. Akerson said. The company has posted back-to-back profitable quarters this year, but he said longer term performance was critical to any stock sales by the government.


Even the thought of the Chinese controlling GM is disturbing... not only from an American economic standpoint but of a strategic standpoint..

One blogger points out that

Fueling the Pentagon’s fears over Obama’s selling GM to China is that they are one of the US Military’s largest defense contractors holding over 150 contracts worth nearly $70 million, one of the most important being the US Navy contract for GM’s Honeoye Falls plant to design and build a hydrogen fuel cell to work on Navy vehicles underwater and just awarded to them yesterday.

The Pentagon’s fears of China are being echoed today by New Zealand [the World's largest dairy exporter who signed the West’s first free trade agreement with the Communists] whose government has begun warning of the Asian giants plans for buying up their dairy companies and gaining control over all of their Nations natural resources.



Your thoughts?