TOKYO - Cash-strapped General Motors Corp. will sell its entire stake in Suzuki Motor Corp. for about US$230 million, the automaker's latest move to stay afloat while awaiting a decision on government aid for the industry.
Suzuki said Monday it would buy back the 3.02 per cent stake from the American auto giant (NYSE:GM), which is seeking a US$25 billion government lifeline, together with Ford Motor Co. and Chrysler LLC, to weather the deepening economic crisis.
While the sale is indicative of GM's near-term cash challenges, the proceeds are not very meaningful, Buckingham Research Group analyst Joseph Amaturo said in a note to investors.
"GM is expected to burn (use up) $4 billion to $5 billion in (the fourth-quarter) or roughly $1.5 billion per month. Hence, the cash proceeds from the sale of its equity stake will not even cover one week of expected cash burn,'' Amaturo said.
Hit by the worst sales slump in more than 25 years and frozen credit, GM has warned that it might not survive through year's end without the U.S. government's financial support.
Hardline Republican opponents of an auto industry bailout have branded the industry a "dinosaur'' whose "day of reckoning'' is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion originally earmarked for a Wall Street rescue.
Suzuki said GM's stake sale was necessary for the ailing American automaker to raise capital, but the Japanese company insisted it would continue a business partnership with GM.
"We fully understand the necessity for GM to raise cash,'' Suzuki chairman and chief executive Osamu Suzuki said in a statement. He said he was in close contact with GM chief executive Rick Wagoner, and the two companies would keep joint projects, including the development of hybrid vehicles and a Canadian joint venture for sports utility vehicles.
In Canada, the two companies operate the joint venture CAMI Automotive Inc. plant in the southwestern Ontario city of Ingersoll, where they plan to stop making Suzuki XL7 s'port utility vehicles because of slow sales in the United States.
The plant currently has a workforce of about 1,500 building the Chevrolet Equinox and Pontiac Torrent as well as the Suzuki XL7. About 525 workers are already on indefinite layoff after one shift was cut in April because of falling sales.
The GM-Suzuki partnership dates to 1981 but those ties loosened after GM sold a 17 per cent stake in Suzuki in 2006, leaving it with its three per cent interest.
GM lost US$2.5 billion in the third quarter and warned that it could run out of cash in 2009 if the U.S. economic slump continues and it doesn't get government help.
The automaker plans to lay off about 3,600 workers beginning early next year as it slows production at 10 of its assembly plants.
In Canada, GM says it will shut down its pickup truck plant in Oshawa, Ont., near Toronto, next fall, cutting 2,600 jobs. GM also plans to close its transmission factory in the southwestern Ontario community of Windsor, affecting another 1,400 jobs.
