Delphi Corp (fka DPHI)

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GM Stock Falls on Kerkorian Sale of Shares

DETROIT, Dec 22, 2005 (AP Online via COMTEX) -- General Motors Corp. shares, which have lost more than half their value since the beginning of the year, fell an additional 4 percent Wednesday as investors fretted about billionaire Kirk Kerkorian's decision to sell part of his stake in the automaker.

GM shares fell 80 cents to $19.05 Wednesday on the New York Stock Exchange. That is their lowest level since 1982, according to Standard and Poor's equity market analyst Howard Silverblatt.

Kerkorian disclosed in a regulatory filing Tuesday that his sale of 12 million GM shares generated a loss that would be used to offset gains elsewhere in his investment company's portfolio for tax purposes. But Robert Barry, an analyst with Goldman Sachs, said he suspects there are other factors at work, since the sales create such a high risk for Kerkorian's remaining 44 million GM shares.

Barry said Kerkorian may have soured on the world's largest automaker after Kerkorian aide Jerome York failed to win a seat on GM's board. Kerkorian also may have been unimpressed with the health care concessions recently granted to GM by the United Auto Workers that will cut GM's annual health care bill by around $1 billion, he said.

"The modest concessions made by the UAW also highlight how little GM can do to address its onerous labor costs," Barry said in a note to investors.

Kerkorian spent about $1.7 billion to build a 9.9 percent stake in GM this year. But he's now about $600 million in the red, counting the almost $110 million loss on the sale of the 12 million shares and the reduced value of his remaining 7.8 percent stake.

Kerkorian's private equity firm, Beverly Hills, Calif.-based Tracinda Corp., said the capital loss from the share sale makes it eligible for certain federal and California income tax breaks. The loss will offset gains from other transactions, including Kerkorian's sale of his stake in the Metro-Goldwyn-Meyer film studio to Sony Corp. for $2 billion that closed in April.

Tracinda left the door open in the Securities and Exchange Commission filing to rebuilding his GM holdings. But some analysts said that is doubtful since Kerkorian has to be concerned about what GM will get for its profitable finance unit, General Motors Acceptance Corp.

GM is looking to sell a controlling stake in the unit, but several possible bidders - including Citigroup Inc. and Wells Fargo & Co. - have said they're not interested.

S&P said recently that it would consider returning GMAC to an investment-grade rating if the controlling stake goes to a highly rated financial institution, but said it could lower the rating if the sale is delayed. Barry said it's likely the sale will be delayed and that several parties - including labor, GM management and bond holders - could try to block any sale proceeds from going to equity holders.

A Tracinda spokesman said Wednesday the company had no comment beyond what it disclosed in the SEC filing.

GM shares also took a beating this week after Toyota Motor Corp. said it would boost global production by 10 percent in 2006 to more than 9 million vehicles, which could allow it surpass GM in total unit sales for the first time.

GM has been struggling with U.S. market share losses as well as high labor and health care costs, and it might be on the hook for a costly bailout at Delphi Corp., its former parts division, which filed for bankruptcy in October. GM lost $1.6 billion in the third quarter.

Concerns about the automaker's future have also been evident in the credit default swaps market, where investors seeking insurance protection against defaults are paying a higher price.

"It is mostly a slowing in the trading that comes in the credit market at year-end, but some of it is related to news of Kerkorian's sale," said Michiko Whetten, analyst at Nomura Securities International Inc.

Whetten said investors looking to buy insurance for five-year GM corporate debt had to pay 12.49 cents for every dollar of debt they want to protect on Wednesday, slightly less than an all-time high of 12.72 cents on December 6.

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AP Business Writers Aleksandrs Rozens in New York and Alex Veiga in Los Angeles contributed to this report.

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On the Net:

General Motors Corp.: http://www.gm.com

By DEE-ANN DURBIN AP Auto Writer

Copyright 2005 Associated Press, All rights reserved

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As of Sunday, 12-18-2005 23:59, the latest Comtex SmarTrend(SM) Alert, an automated pattern recognition system, indicated an UPTREND on 09-12-2005 for C @ $46.02.

As of Sunday, 12-18-2005 23:59, the latest Comtex SmarTrend(SM) Alert, an automated pattern recognition system, indicated a DOWNTREND on 11-08-2005 for GM @ $26.35.

As of Sunday, 12-18-2005 23:59, the latest Comtex SmarTrend(SM) Alert, an automated pattern recognition system, indicated a DOWNTREND on 11-10-2005 for RGM @ $15.44.

(C) 2005 Comtex News Network, Inc. All rights reserved.

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APO Priority=r APO Category=1310 (PROFILE (CO:General Motors Corp; TS:GM; IG:3300;) (CO:Sony Corp; TS:SNE; IG:3700;) (CO:General Motors Acceptance Corp; TS:GOM; IG:3300;) (CO:Citigroup Inc; TS:C; IG:8300;) (CO:Wells Fargo & Co; TS:WFC; IG:8300;) (CO:Toyota Motor Corp; TS:TM; IG:3300;) (CO:Delphi Corp.; TS:DPHIQ; IG:0000;) (COUNTRY:United States; ISOCOUNTRY3:USA; UNTOP:021; APGROUP:NorthAmerica;) )

KEYWORD: DETROIT
SUBJECT CODE: 1310