General Motors Corp, the world's largest carmaker, will sell a 17 percent stake in Japan's Suzuki Motor Corp, paring its 25-year investment in the world's biggest maker of minicars.
GM will sell 92.36 million Suzuki shares to the Japanese company tomorrow for ¥230 billion in cash (US$1.96 billion), or ¥2,490 each, according to its statement yesterday. The Detroit-based carmaker said it will keep 3 percent of Suzuki and may report a pre-tax gain of between US$550 million and US$750 million from the sale.
"There aren't many reasons for Suzuki to stay with GM as their collaboration on compact cars has faded," said Hirofumi Yokoi, a Tokyo-based analyst for CSM Worldwide, a consulting company based in Farmington Hills, Michigan. "Suzuki is a frontrunner in emerging markets such as India and China while GM uses its South Korean unit to expand in those regions."
GM, bowing to shareholder pressure to improve earnings from last year's US$8.55 billion loss, is slashing executive salaries, cutting dividends by half, selling assets and revising its health and pension benefits. The carmaker may review at a board meeting tomorrow a bid led by Cerberus Capital Management LP and a group of investors to buy majority of its most valuable business unit General Motors Acceptance Corp, people familiar with the plan said.
GM in October sold its entire 20 percent stake in Fuji Heavy Industries Ltd, the maker of Subaru cars in Japan. GM sold 8.7 percent of Fuji Heavy to Toyota Motor Corp for US$315 million cash and sold the remainder in the open market.
Suzuki's purchase "will put pressure on the company" because it's already investing a record ¥480 billion in the two fiscal years ending March 2007 on expansion, Credit Suisse's analyst Koji Endo said.
Suzuki's shares fell yesterday for the first day in six, dropping 0.4 percent to ¥2,490.
The two carmakers said they will continue to work together, including on a plan to produce the Concept X mid-sized sport-utility vehicles in Canada this year.
The Japan dealers of Suzuki sell GM's Chevrolet-brand vehicles, while its North America network handles sales of GM models made by GM Daewoo Auto & Technology Co.
"Despite the dissolution of the equity relationship, there should be no major impact on on-going projects between the two companies," said Tatsuo Yoshida, a senior analyst at Merrill Lynch Securities Co in Tokyo.
At the same time, Suzuki had been working with other Japan-based carmakers on minicars. Suzuki supplies its minicars to Nissan Motor Co, 44 percent owned by Renault SA, and Mazda Motor Corp, a third owned by Ford Motor Co.
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