General Motors Opens New Plant in China, Sells Allison Transmission Unitgeneral Motors Opens New Plant in China, Sells Allison Transmission Unit

General Motors Corp. has inaugurated a new engine plant at its minicar factory SAIC-GM-Wuling Automobile Co. Monday in southern China.

The new engine plant, which reportedly cost the automaker 2 billion yuan ($263 million) lies adjacent to the factory in Liuzhou and is set to produce a capacity of 300,000 units a year. The automaker has said in a statement that production of 1.1-liter and 1.2-liter engines are set to begin in August.

According to the company statement, the new engine plant will facilitate new product development at the minicar factory, which now buys engines and related parts from outside suppliers. The engines will be used first in a new minivan model, the Wuling Hong Tu, a vehicle jointly developed by GM's Pan Asia Technical Automotive Center and SAIC in Shanghai.

SAIC-GM-Wuling Automobile Co. is a three-way commercial vehicle joint venture between GM, Shanghai-based partner SAIC Motor Corp., and Guangxi province-based Wuling Automobile Co. GM owns 34 percent of the venture, SAIC has 50.1 percent and the remainder is held by Wuling Automobile.

In the first quarter, SAIC-GM-Wuling Automobile's unit reported sales which climbed to 27 percent from a year earlier to more than 160,000 vehicles. In 2006, SAIC-GM-Wuling sold 460,155 vehicles, making it the biggest mini-vehicle producer in China.

Meanwhile, back in the home front, the General Motors continues to struggle as the automaker decided to sell its Allison Transmission unit to a pair of buyout firms for $5.6 billion on Thursday last week.

Reports say that GM, which has lost more than $12 billion in two years, will use the money to cover turnaround-related expenses including plant closings, worker buyouts and the production of new models.

GM has agreed to sell Allison's commercial and military business, based in Indianapolis, to investment firms The Carlyle Group and Onex Corp. A production facility in Baltimore that builds conventional and hybrid transmissions for pickup trucks and sport utility vehicles however, will remain with GM.

The automaker’s move is key to the automaker's strategy to cost-cut by letting go of units which are not directly related to the core business of building passenger cars and trucks. Aside from the Alison deal, the automaker has also sold more than $16 billion in assets over the past two years, including last year's $14 billion sale of the GMAC financial services company to private equity firm Cerberus Capital Management LP. The automaker – which also makes auto parts like GMC mud flap, is likewise reportedly mulling over the idea of putting a Flint-based unit that makes medium-duty trucks up for sale too.

Wall Street on Thursday responded positively to news of the Allison sale, sending GM stock up 2 percent to $38.15 -- its highest level since January 2005.