Breaking News : GM should sell Buick to SAIC

SHANGHAI : November 4, 2008 - So General Motors is lobbying Washington for money to buy Chrysler. But before tax money is approved for the deal, I'd like GM to try harder to sell assets and raise private capital.


Here's an idea: Sell Buick to its partner in China, Shanghai Automotive Industry Corp.

I claim no special insight from decision-makers at GM or SAIC, but the deal makes sense for various reasons.

First, the obvious: GM is burning through an estimated $1 billion (6.85 billion yuan)of cash a month. Moreover, its lending arm, GMAC Financial Services, is so short of capital that it can't adequately provide auto loans to consumers.

So it's time for difficult decisions. Buick has long been a core brand for GM. But in today's crisis, it's expendable. GM does not have the money to reinvigorate Buick's product lineup, now down to just two sedans and a crossover in the United States.

GM already has too many brands, which it has recognized by putting Hummer up for sale. The problem will only worsen if it acquires the Jeep, Dodge and Chrysler brands.

It's best for GM to sell Buick while the brand still has value. It's hard to say how much Buick is worth, but India's Tata Motors paid $2.3 billion (15.75 billion yuan) for Jaguar and Land Rover. So I'm guessing Buick might fetch $1 billion (6.85 billion yuan).

While Buick is drifting down in America, it's sound in China. Chinese consumers' regard for the brand predates the Communist revolution.

Buick sales are higher in China than in the United States. Last year, GM sold 185,791 Buicks in the United States and 331,780 in China. GM and SAIC jointly operate an important product development engineering center in China.

In North America and Asia, Buick's manufacturing, product development and dealers are embedded in GM's organization. SAIC could start with a modest role as Buick's new owner but gradually assume more operational responsibility.

In today's crisis, creative solutions are imperative. Nowadays, nothing is sacred in Detroit.

[Source : Automotive News China]