GM downplays concerns on China’s bid for Opel image

General Motors Corp.’s new international boss played down potential competition from a Chinese-owned Opel and said it will expand research and development operations in China, India and South Korea as Asia becomes an increasingly important market for its vehicles.

“The trend is going to be that those three centers will take on more activities over the next three years,” said Nick Reilly, executive vice president of GM international operations, in his first interview since taking charge of GM’s operations outside North America last week.

Mr. Reilly, who had been overseeing GM in Asia, was promoted as GM emerged from Chapter 11 bankruptcy proceedings. Mr. Reilly will remain in Shanghai, where he had been based.

Beijing Automotive Industry Holding Co. is one of three bidders for Opel, along with Magna International Inc. and RHJ International SA, a Belgium-based investment group.

GM has a nonexclusive memorandum of understanding with Magna, but it expects to put “two or three fully formed proposals” to the trust overseeing the GM Europe business and the U.S. auto task force, according to a person familiar with the plans. GM Europe is not expected to name a preferred bidder ahead of the decision.

Mr. Reilly said a successful bid by Chinese government-owned BAIC for a stake in Opel wouldn’t be a “particular concern” for GM’s fast-growing China business.

BAIC’s proposal includes selling and ultimately building Opel-brand cars in China.

“BAIC, I think, thinks it could sell more in China than Opel is currently selling in China, and potentially manufacturing in China,” Mr. Reilly said. “It would have a bigger presence, but I don’t see it as being any major difference in terms of competition.”

Mr. Reilly is the first senior GM official to address competitive issues surrounding a potential purchase of its European business by a Chinese player. BAIC is offering to invest €660 million ($921 million) for a 51% stake in Opel.

Passenger vehicles manufactured by GM’s 50-50 joint venture with SAIC Motor Corp. are “already pretty different” from Opel products sold in China, Mr. Reilly said.

GM sold about 1,000 imported Opel cars in China in the first half of this year, compared with the overall total of more than 800,000 vehicles it sold in China during the same period.

Separately on Monday RHJ said it was in “advanced negotiations” with GM over a majority stake in Opel.

A bid from RHJ would require only €3.8 billion in government financing guarantees, compared with the €4.5 billion of loan guarantees requested by Magna, a person close to the matter said. BAIC has asked for €2.64 billion in guarantees.

RHJ International wouldn’t close any Opel plants in Germany or England, the person said.

Meanwhile, the German government raised concerns that Opel could become too reliant on the Chinese government if BAIC succeeds in its takeover bid, according to an internal document from the German economics ministry. The document, dated July 3 and not adopted by the minister, said a new Opel company could get into a “difficult dependency” on the Chinese government.

The document raised concerns that China would get full access to Opel’s technologies and then China could dictate to what degree the new Opel could make use of it.

In its offer, BAIC plans to invest $2.25 billion in Opel in China to ramp up production there by 2015. It wants to expand production in China to 485,000 Opel cars by that date and plans to build a network of 400 dealerships by then, according to the document.

Mr. Reilly, meanwhile, said the new post-bankruptcy GM now has easier access to financing. “There was a cloud over getting new financing that has been lifted,” he said.

Prior to its June bankruptcy filing in the U.S., GM had said expansion in Asia was restricted by funding problems, spurring it to seek government aid in South Korea, Thailand and India.

Talks with Korea Development Bank for financial aid for GM’s cash-strapped GM Daewoo Auto & Technology Co. unit are “going well,” he said, adding he expects an agreement for a credit line in the next month or two.

GM’s new financial structure has likewise boosted talks about a plan to set up a light-truck joint venture with China FAW Group Corp., China’s second largest auto maker by sales volume, Mr. Reilly said. He expects a decision in the next two to three months.

As GM’s R&D expertise in China improves, Mr. Reilly said, there’s a “good chance” China will become an export base for GM vehicles after two or three years.