SAIC will acquire its stake through a simultaneous direct asset transfer.

Wuling, in southwest Guangxi Zhuang Autonomous Region, is the No 3 mini-commercial vehicle producer in the country. It is expected to make about 110,000 trucks and vans this year, priced between US$2,500 and US$5,500.

The participation of the US firm in Wuling's restructuring represents a victory for the central government, which has been actively promoting foreign investment in the mainland's backward western provinces, particularly for the purpose of industrial revitalisation.

GM's stake would constitute one of the first big pay-offs since Beijing started its Go West campaign earlier this year.

The deal also signals an important step forward in the government's attempt to consolidate its inefficient car and truck industry before China's entry into the World Trade Organisation.

There are 112 vehicle-makers in the mainland, which are expected to produce about two million cars, trucks and buses this year.

For GM, which has vowed to create an across-the-board manufacturing capability in China, the benefits of joining forces with Wuling are no less compelling.

The US firm immediately can bring the truck-maker's 5.2 per cent total market share beneath its own corporate umbrella, while gaining market entry to the mini-commercial vehicle segment, one of the fastest growing in the mainland market.

Last year, Chinese vehicle-makers produced 429,799 compact light trucks and vans, compared with 65,987 in 1992, representing average annual growth of 30.5 per cent.

The mini-commercial segment now represents about 26 per cent of the total market, compared with 6.61 per cent in 1992.

GM executives have made plain their objective of 15 per cent of the Chinese vehicle market by 2005.

The company holds a share of more than 3 per cent through a small number of imports and its joint venture with SAIC in a US$1.5 billion factory making Buick sedans.

Regular production at a second US$230 million truck-making joint venture in Shenyang will start next May.

Nor could the timing of contract signing be better for the US firm.

Only last week, GM launched production of the Chevrolet Blazer at Shenyang and rolled out a new mainland family car, the Buick Sail, to be made in Shanghai.

Speculation about GM and SAIC joining forces with Wuling has been running since March, when Shanghai mayor Xu Kuangdi told state media that Shanghai had received the blessing of the Central Committee and the National People's Congress Standing Committee to forge ahead with a vehicle-making alliance of GM with Liuzhou Wuling.

Mr Xu was quoted as saying Shanghai had a responsibility to take the lead in organising China's international and domestic vehicle industries in preparation for global competition.

Wuling was established in 1958 as the Liuzhou Tractor Plant but started making light commercial trucks only in 1982.

It was not until the start of the 1990s that its truck and van sales began to take off, reaching production of 100,000 vehicles last year.

Despite the company's recent breakneck growth, the firm has been crippled by heavy losses, attributable to its product mix, favouring lower-priced vehicles, and crowding in its market segment, which has led to a price war.

It is believed that GM's partnership with SAIC at Liuzhou will be crucial for Wuling's planned restructuring.

SAIC will bring to the table its management and technical expertise, especially in components making and distribution, while GM is expected to capitalise on its alliance with Fuji Heavy Industries, which makes Subaru cars, to bring new products to Wuling's production lines.

GM pins hope on mainland, Page 5

Graphic: motorgbz