GM Sells Steering Biz to China - Analyst Blog

General Motors (MTLQQ) has completed the sale of its Saginaw, Michigan-based Nexteer steering business to China-based Pacific Century Motors. Pacific Century Motors is a joint venture between Beijing-based auto components supplier Tempo Group and E-Town, the financing and investing arm of the Beijing municipal government.

None of the parties have disclosed the terms of the deal. However, some sources have revealed that the steering unit has been sold for about $450 million, making the biggest single investment in the global auto parts-making industry by a Chinese company.

In October last year, GM acquired the Nexteer steering unit from its former subsidiary, Delphi Corp., as a part of the latter's bankruptcy filings. Delphi was GM's parts-making wing until it was spun off as an independent entity in 1999. However, GM planned to sell off the unit in order to concentrate on its four core brands – Chevrolet, Cadillac, GMC and Buick.

Nexteer has 22 steering and half shaft manufacturing facilities, 6 engineering facilities and 14 customer support centers spread across North and South America, Europe and Asia. Its customers include Fiat SpA, Ford Motor Co. (F), Toyota Motor Corp. (TM), Chrysler Group LLC and PSA Peugeot Citroen, apart from GM itself. It also supplies to some automakers in China, India and South America. 

Presently, Nexteer's headquarter and research and development facility in Michigan has about 3,000 employees. As part of the deal, Pacific Century Motors has reportedly agreed to honor the terms accepted by Nexteer under a five-year labor agreement with the United Auto Workers union. Under the deal, Pacific Century will also retain Nexteer's headquarter in Michigan.

 

The Chinese automakers have been struggling hard to enhance their global profile by upgrading their technology to meet the international standards. The acquisition of Nexteer undoubtedly is part of this strategy.

In line with the same strategy, Beijing Automotive Industry Holding Group (BAIC) has purchased the intellectual property rights from GM's Saab in order to develop its own brands and introduce new models. BAIC purchased the rights to certain powertrain, engine and gear-box technology for Saab's 9-5 and 9-3 sedans.

In a similar move, Zhejiang Geely Holding Group bought Volvo cars from Ford in order to tap China's high-growth auto market by acquiring modern, innovative technologies from the Swedish brand to strengthen its car lineup. In December last year, Geely also signed up  Johnson Controls Inc. (JCI) as its global parts supplier.

 
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