A10
Politics & The Nation
EZ RE
KLMNO
GM stock offering attracts Chinese banks
Wealth funds elsewhere in Asia, Middle East are interested, too
BY SHARON SILKE CARTY
detroit — Among the banks helping General Motors with its initial public stock offering next week are twoidentified by initials only: ICBC and CICC. Americans uncomfortable
with U.S. government ownership of General Motors may want to hear more: One of those banks is the Industrial and Commercial BankofChina, one ofChina’s four big central government banks. The other, China International Capital Corp., is a joint venture run primarily by Central Huijin Investment, an arm of the state, andMorgan Stanley. This is the first time Chinese
government banks have partici- pated in a major U.S.-issued IPO, according to IPO tracking firm Dealogic. The banks are listed as co-managers in the offering, meaning they will sell a portion of the new shares. Chinese automaker SAIC,GM’s
partner in China, is finalizing plans to buy about a 1 percent stake, worth about $500 million, in GM’s IPO, the Wall Street Journal reported Friday. SAIC is owned by the Shanghai city gov- ernment. Other foreign investors that
are interested include several sovereign wealth funds located in the Middle East and Asia. The Journal says those funds, which manage the finances of royal families and some nations, could invest $1 billion in GM’s IPO. There could be political back-
lash for President Obama, who has spent the past week in Asia addressing economic issues, such as currency exchange differences between the United States and China. Obama has argued that China artificially deflates its cur- rency, the yuan, in an attempt to make its exports cheaper. Many Americans were unhap-
py when the United States bailed out GM, calling the company “GovernmentMotors.” GM’s Nov. 18 stock offering will reduce the Treasury Department’s stake in the company from 61 percent to 43 percent, and will help pay back the more than $50 billion that taxpayers invested inGMto keep it from collapsing. More stock offerings will take place in the next year or so, letting the govern- ment fully divest from the auto- maker and making back much or all of its bailout investment. “It’s a very political topic, but
what Americans need to remem- ber is that General Motors is an international company,” said Re- becca Lindland, an analyst with IHS Automotive. “If we want to get our money back, we need to understand that they have to do business on a global basis.” Trea- sury has been clear that interna- tional investors are welcome to invest in GM, and many outside theUnited States are considering taking stakes in the company. “We expect that a large and
diverse group of institutional in- vestors will be offered an oppor- tunity to participate, with no single investor or group of inves- tors receiving a disproportionate share or unusual treatment,” Treasury said in a statement. The United States has become
a popular haven for Chinese in- vestors, second only to Australia in attracting Chinese stock in- vestments, said Derek Scissors, a research fellow at conservative think-tank the Heritage Founda- tion. In the first half of 2010, Scis-
sors said, Chinese companies and state-owned businesses sank $45 billion into investments and engineering projects worldwide. About $1.6 billion of those invest- ments came to the United States. In China, businesses operate
with the funding and blessing of the government, said Tim Dunne, director of global automotive op- erations for J.D. Power and Asso- ciates. The government behaves like an interested shareholder, ensuring companies have compe- tent management and that they
boost economic growth in their regions. Many Chinese automakers are
looking for a way into the U.S. market, he said. China is the largest car market in the world, but the United States is the most profitable, he said. “The amount of money chang-
ing hands here is much greater,” Dunne said. The average selling price of a car in the United States is $27,500, compared with about $17,000 in China. “Multiply that over millions of vehicles, and it’s quite a difference.” SAIC and GM already have a
long-standing partnership in China—GMcould not sell cars in China without partnering with a local business — and it’s unclear what size stake SAIC may take in GM. The deal would need Chi- nese government approval. Chris Theodore, president of consulting firmTheodore&Asso- ciates, says SAIC’s investment in GM is likely an attempt to strengthen its ties with the auto- maker. Theodore, who was part of a
group that tried to take over Volvo before it was sold toChina’s Geely group, says SAIC isn’t the kind of company that can branch out into U.S. sales. Most of its models use GM technology and are essentiallyGMcars. “They rely on GM for a lot of
their profitability,” he said. Michael Maduell, president of
the SovereignWealth Fund Insti- tute, a California-based group, said global investors are looking at the United States because they think the overall market is under- valued. Other potential investors in GM include Abu Dhabi’s Mubadala and Singapore’s Te- masek, which are both known for actively investing in companies, he said. Investors are “looking at emerging markets, like China and India, but all those assets are overvalued,” Maduell said. “America still has a lot of fantastic investment opportunities in real estate and small- to mid-cap stocks.”
— Associated Press
SUNDAY, NOVEMBER 14, 2010
JEFF KOWALSKY/BLOOMBERG NEWS
GM’s stock offering Thursday will reduce the Treasury Department’s stake in the company from 61 percent to 43 percent and will help pay back the more than $50 billion that taxpayers invested inGMto keep it from collapsing.More stock offerings will take place in the next year or so.
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