General Motors Co said on Wednesday it will sell its Nexteer Automotive unit to a China government-backed group, as GM focuses on its core car business while the Chinese look to bolster their global competitiveness.
GM said it reached a definite agreement to sell the maker of steering systems to Pacific Century Motors, a joint venture between Chinese auto parts supplier Tempo Group and the financing and investing arm of the Beijing municipal government.
Financial terms of the deal were not disclosed but some media reports have put the value at around $450 million.
GM, which is planning to file for a near-$20 billion IPO in the coming weeks, aims to close the deal by the end of the year, pending regulatory approvals.
GM had been looking to sell Nexteer after it bought the business in October from Delphi, its former parts subsidiary, under a deal to support Delphi's reorganization in bankruptcy.
Nexteer, based in Saginaw, Michigan, has about 6,200 employees and 22 manufacturing facilities in North and South America, Europe and Asia. Its global revenues topped $2 billion in 2008.
The sale of Nexteer supports our objective to focus on our core auto business and is the final step in our efforts to position Nexteer as an independent supplier, said Steve Girsky, GM vice chairman in charge of corporate strategy.
Zhao Guangyi, chairman of Pacific Century Motors, said the deal would provide Nexteer with new growth opportunities and greater access to the Chinese auto market, now the world's largest.
The move follows Geely Automobile Holdings' $40 million takeover of Australian gearbox maker Drivetrain Systems International last year, and marks the latest acquisitions of overseas parts assets by ambitious Chinese firms looking to transform themselves into global players, analysts said.
Acquisition of parts assets is a more expedient way to improve the overall quality of made-in-China cars than the takeover of a foreign brand. I expected to see more cross border parts deals down the road, said Lin Huaibin, an analyst with IHS Automotive.
Geely's parent is also in the process of buying Ford Motor's Volvo car unit, a move that has raised eyebrowns of some industry observers questioning the Chinese car maker's ability to turn around the prestigious but money-losing brand.
Neither Pacific Century Motors or Tempo Group could be reached immediately.
Nexteer Automotive's customers include GM, Fiat SpA, Ford Motor Co, Toyota Motor Corp, Chrysler Group LLC, PSA Peugeot Citroen, as well as automakers in India, China and South America. Sales to GM account for almost half of its sales.
The new Chinese owner said it would honor the terms of Nexteer's recently negotiated five-year labor agreement with the United Auto Workers union. The agreement includes adding new jobs in Saginaw.
Robert Remenar will remain president of Nexteer.
Investment bank Moelis & Company acted as financial adviser to Pacific Century Motors.
(Additional reporting by David Bailey in Detroit, Fang Yan in Shanghai and Alison Leung in Hong Kong; Editing by Steve Orlofsky and Lincoln Feast