GM nears deal on China automaker

SHANGHAI - General Motors is close to an agreement to take a stake in China's Liuzhou Wuling Motors Co., the country's seventh largest vehicle producer and a leader in ultralow-price, basic transportation.

GM China Chairman Philip Murtaugh said here last week that he expected to announce a deal soon. "The fat lady is tuning up," he said.

GM has been in talks with Wuling for at least two years. An agreement would give the U.S. automaker a direct presence in China's largest and fastest growing segment, ultra-basic transportation, where vehicle prices typically are under $5,000. Sales in the segment are expected to top 600,000 units this year, and Wuling's sales have risen 21 percent through June to 76,000 units.

In contrast, GM produces $45,000 Buick sedans and a $25,000 minivan at its 100,000-capacity joint-venture plant here. A small Opel-based sedan priced around $12,500 was added to the lineup early this year.

Murtaugh declined to reveal the size or price of the equity stake GM is considering. Shanghai Auto Industry Corp., GM's partner in China, already holds a 75.9 percent stake in Wuling.

"Our stake would be significant enough that GM will expect to be allowed to contribute in a significant way," he said.

Wuling produced 110,000 half-ton pickups, minibuses and light-commercial vehicles last year based on a 15-year-old Mitsubishi design. Its

only plant in the southwest city of

Liuzhou has a capacity of 150,000 units annually, but SAIC has said it intends to double that by 2010.

In view of tighter emissions and safety legislation scheduled to take effect in China next year, Wuling has "no future by itself - no capability to develop new products or respond to life in the real auto world," Murtaugh said.

GM will provide technical support and assistance to Wuling to improve process technology, while Japan's Suzuki Motor Corp., another GM partner, will provide a new range of basic transportation vehicles.

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