SHANGHAI -- General Motors' main Chinese venture will pay $17.28 million in kind for a 25 percent stake in a troubled auto plant in China's northeast, an existing shareholder said Friday.
Jinbei Automotive Co. Ltd., controlled by Brilliance China Automotive Holdings Ltd., will receive the money as "compensation for loans provided to Jinbei GM," Jinbei Automotive said in a statement published in the Shanghai Securities News.
The actual 25 percent stake in the joint venture will be given for free to Shanghai GM -- a 50-50 partnership between GM and Shanghai Automotive Industry Corp. -- which is due to become half owner of Jinbei GM.
GM has declined to discuss specifics of the complex restructuring deal, which will see Jinbei GM's four Chinese shareholders offload their 50 percent stake to Shanghai GM.
Shanghai Auto and GM will then each take 25 percent, in effect giving the two companies equal control of the $230 million plant, which has annual capacity of 30,000 units but sold just under 3,300 units in 2003.
Jinbei said the venture had racked up losses of $107 million between 2001 and November 2003.
"Due to the present situation at Jinbei GM, the company's board has approved the gratis transfer of its 25 percent stake to Shanghai GM," Jinbei Automotive said.
The plant had been hampered by a poor distribution network and reliance on a single product -- the Chevrolet Blazer SUV.
GM is planning new investment in the plant, as well as broadening its product mix.
The deal is seen by analysts as vital to GM's plans for the competitive Chinese car sector as it plays catch up with dominant player Volkswagen AG, which had about 33 percent of the market in 2003 compared with GM's 8.5 percent.
Despite the competition, GM increased sales from its four Chinese automaking ventures 15.2 percent in January from a year earlier, to 34,982 vehicles.
The Jinbei GM plant will become GM's fourth plant to be run in cooperation with Shanghai Auto, once the deal is complete and approved by the government, which GM expects by the end of 2004.
The two companies are partners at factories in Shanghai, the northeastern province of Shandong and the southern region of Guangxi, in which another Chinese auto company also has a stake.