By Yang Jian, managing editor, Automotive News China
Shanghai, China -- Relations between joint venture partners can be tricky, especially in cases where the corporate knot was tied due to regulatory requirements.
To date most global automakers have set up production joint ventures with local peers in China, as required by Chinese rules, with the foreign side holding no more than a 50 percent interest in the ventures.
Now, an increasing number of global automakers want to trade technology with Chinese partners for more control of their joint ventures.
So far at least three global automakers have made known their intent to gain more control of their China joint ventures.
First is General Motors.
Shanghai General Motors Co. was established in 1997 as a 50-50 joint venture between GM and SAIC Motor Corp. In 2009, tittering on the verge of bankruptcy, GM sold a 1 percent stake in the joint venture to SAIC for $84.5 million cash, as well as SAIC's approval to sell SAIC-GM-Wuling Automobile Co.'s microvans in India. SAIC-GM-Wuling was majority owned by SAIC.
Now that it has recovered financially, GM wants its Shanghai GM share back. "We have an option to buy that 1 percent," GM Chief Executive Officer Dan Akerson told shareholders in June in Detroit. "It's our intention to exercise that."
Second is Volkswagen AG.
Unsure about the prospects of the Chinese market in 1991, the German automaker let China FAW Group Corp. control 60 percent of their joint venture FAW-Volkswagen Automobile Co. Aside from Volkswagen-brand models, FAW-Volkswagen also produces several Audi vehicles.
But times have changed. China is now the world's largest auto market. It has also become the largest market worldwide for the Volkswagen and Audi brands. Hence, Volkswagen's executives have expressed wishes to the Chinese government to significantly raise its stake in the joint venture.
The third is Suzuki Motor Corp.
The Japanese automaker set up its first China joint venture with Changan Automobile Co. in 1993 and the second with Changhe Automobile Co. in 1995. In both joint ventures, the Chinese side owns the 51 percent stake, leaving the rest for Suzuki and some other Japanese investors.
In 2009, Changhe was acquired by Changan's parent company, China Changan Automobile Group. Currently Changan Automobile Group plans to merge Changhe Suzuki into Changan Suzuki. Suzuki has agreed in principle to the merger, but it has also requested to increase its stake in Changan Suzuki to 50 percent.
Now the question is how likely the three global brands will get what they want since their Chinese partners won't easily give up majority ownership of the joint ventures.
GM and Volkswagen think they have something their Chinese partners would be willing to trade for: Technology.
Lagging technology has been the major obstacle for state-owned Chinese companies like SAIC, FAW and Changan in their effort to develop their own passenger vehicles.
Take SAIC, for example. It has developed the first wave of its Roewe-brand cars on a platform it bought from the now-defunct MG Rover in 2005. Now it is looking for new platforms to upgrade its product lineup.
GM is said to have agreed to let SAIC base its next generation Roewe 760 on the Buick LaCrosse. And there is certainly more GM can offer for its Chinese partner.
It's the same case with FAW. If Volkwagen can raise its stake in FAW-Volkswagen, it will grant FAW access to its advanced powertrain technology, including turbocharged stratified injection engines and direct shift gearbox transmissions, according to Chinese media.
Indeed, there are some enticing deals out there for global automakers to make with their local partners and gain control of their Chinese joint ventures.