GM in $2.7b sell-back Kim Chang-Ran for Reuters 08mar06
EMBATTLED US car giant General Motors will sell most of its stake in Suzuki Motor Corp back to the Japanese car maker, raising about $US2 billion ($A2.7 billion) in much-needed cash to restore its tattered balance sheet.
The sale would leave GM with a 3 per cent stake in Suzuki, down from 20.4 per cent.
It ends months of speculation about a possible unravelling of their equity relationship after the world's biggest car maker unloaded its entire 20 per cent stake in Japan's Fuji Heavy Industries last year, also to raise money.
General Motors lost $US8.6 billion in 2005 and is undergoing sweeping restructuring driven in part by new board member Jerry York, an aide to GM's largest individual shareholder, Kirk Kerkorian.
Mr York has called for more aggressive turnaround efforts, including the sale of various assets around the world.
"We see a $US2 billion cash injection as meaningful, even in light of GM's robust corporate liquidity," JP Morgan analyst Himanshu Patel said in a note to clients. "This sale was largely unanticipated by the market."
GM shares rose as much as 3.6 per cent, their biggest one-day gain since late January.
GM and Suzuki, which first formed a capital tie-up in 1981, said they would continue to work together at the operational level. Suzuki also owns an 11 per cent equity stake in GM's South Korean unit, GM Daewoo Automotive & Technology Co.
"This transaction will allow us to preserve our business relationship, while further building up GM's already significant liquidity position during this critical phase of our turnaround," GM chief executive Rick Wagoner said.
GM said it expected a pre-tax gain of $US550 million to $US750 million from the sale.
GM's bonds also rose on hopes that a board meeting on Monday may lead to GM accepting an offer to buy the controlling stake in its finance unit, General Motors Acceptance Corp.
GM's 8.375 percent bond due 2033 rose to 71.5 cents on the dollar, from 69.94 cents on Friday, according to MarketAxess. GMAC's 8 percent bond due 2031 rose to 90.56 cents from 89.5 cents on Friday.
JP Morgan's Patel said the Suzuki transaction could indicate that the proposed sale of General Motors Acceptance Corp, the car maker's finance arm, remains some way off.
Suzuki, a compact car maker expecting its sixth straight year of record operating profits this year, said it would use cash at hand to buy back 92.36 million shares from GM for a maximum ¥229.98 billion ($A2.64 billion).
"I think 3 per cent is an appropriate (ownership) level," Suzuki CEO Osamu Suzuki told a news conference in Tokyo, adding he had always suggested a stake that was similar in percentage to what GM contributes to Suzuki's revenue, or around 3 per cent.
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