General Motors on Sunday said it and Chinese partner Shanghai Automotive Industry Corp. have signed an agreement to take over the engine factory of South Korea’s bankrupt Daewoo Motor Co. in eastern China.
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Dow Jones Newswires said the move further expands the cooperation between GM and Shanghai Automotive, which last month unveiled plans to partner in GM’s loss-making Chinese sports utility vehicle making venture, Jinbei General Motors Automotive Co.
The report said the two partners’ main business is a 50-50 joint venture, Shanghai General Motors Co., which builds Buicks in Shanghai.
Citing a GM statement, Dow Jones said the engine factory, in Yantai, Shandong Province, was set up in 1996 by units of Daewoo Group, and two Chinese carmakers. In 1998, Daewoo Motor Co. took over 50% of the factory, and in 2002 Shandong International Trust and Investment Corp., an investment arm of the Shandong provincial government, took the rest.
According to the agreement, GM will own 25%, Shanghai Automotive will own 25%, and the joint venture Shanghai GM will own 50% of the engine factory, which will be renamed Shanghai GM Dong Yue Automotive Powertrain Co, GM told Dow Jones.
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By GlobalDataThe plant, idle since 1997, will have an annual production capacity of 300,000 engines, which will be used in vehicles from GM and Shanghai Automotive’s joint ventures, the report said.
GM reportedly didn’t disclose any financial details of the deal, but said the engine company has a registered capital of 2.28 billion yuan.
Dow Jones noted the plant is GM’s latest acquisition of a Daewoo Motor asset since it took over Daewoo’s main car assembly plants in South Korea and elsewhere. Last week, a GM official revealed that GM had reached an initial agreement to purchase Daewoo Motor’s small-car production facilities in India in a transaction expected to exceed $US100 million.
The report added that, in 2002, GM took control of Daewoo Motor’s main operations after the South Korean carmaker, along with its parent Daewoo Group, crumbled under a mountain of debt in 1999. GM, Japan’s Suzuki Motor Corp. and China’s Shanghai Automotive jointly invested $400 million to acquire a 67% stake in the company.
GM owns a 42.1% stake for its $251.3 million cash investment while Suzuki has 14.9% and Shanghai Auto 10%. Daewoo Motor’s creditors, including state-run Korea Development Bank, own the remaining 33%, Dow Jones said.
The report also noted that, in 2002, GM and Shanghai Automotive invested $108 million to take control of Yantai Bodyshop Corp., also located in Shandong Province, which once assembled cars for Daewoo Motor. That plant, renamed Shanghai GM Dong Yue Motors Co., makes the [Brazil-designed, previous-generation Opel Corsa-based] Buick Sail compact car.
Daewoo Motor now exists only to oversee the sale of the bankrupt Daewoo Group’s overseas units, Dow Jones said.
