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NINETY EIGHT REGENCY

GM near deal to sell China venture control to partner SAIC

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GM near deal to sell China venture control to partner SAIC

DECEMBER 3, 2009 - 12:31 PM ET

DETROIT (Reuters) -- General Motors Co. is nearing a deal to sell majority control of its China venture and transfer half of its India operations to Chinese partner SAIC, sources with knowledge of the situation said today.

The pending deals would give GM an infusion of cash as it restructures and reshape the U.S. automaker's profile in two of the world's fastest-growing markets.

Under the deal expected to be announced shortly, GM would sell 1 percent of its 50-50 China joint venture to SAIC Motor Corp., China's biggest automaker, two sources briefed on the deal told Reuters on the condition of anonymity because the talks are private.

That transaction would give SAIC a controlling stake in GM's fastest-growing market. SAIC could pay up to 20 percent of the joint venture value to take control, while GM would have the option of buying back the stake later with a premium, the sources said.

GM's international operations have been looking to raise cash in the last month to cover losses incurred when its South Korean subsidiary, Daewoo, made a costly bad bet on financial derivatives based on the Korean won, the New York Times reported today.

SAIC and GM are 50-50 partners in Shanghai GM, the maker of Cadillac, Buick and Chevrolet models, while it also has a three-way tie, SAIC-GM-Wuling, between SAIC, GM and Liuzhou Wuling Automobile, which makes popular mini vans and mini trucks.

GM, which now holds a 34 percent stake in SAIC-GM-Wuling, has been seeking to increase its stake in the venture -- SAIC owns 50.1 percent and Liuzhou Wuling 15.9 percent.

GM was not immediately available to comment. SAIC declined to comment.

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This appears to be a complicated loan. With the laws in China, SAIC really is the controller even though it was 50/50. So GM is getting a cash out loan with a buyback at a later date.

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