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GM may struggle to sell assets
(China Daily)
Updated: 2008-11-14 08:07
General Motors Corp, seeking a federal bailout to stay in business, is having a harder time selling $4 billion in assets after saying it may run out of cash, according to people familiar with the negotiations. Potential buyers are concerned that the units including the Hummer sport-utility vehicle brand would lose value should GM fail, said the people, who asked not to be identified because the talks are confidential. The divisions being unloaded all would rely on Detroit-based GM as a partner after a sale. "With the specter of bankruptcy looming over GM, there probably isn't a much more difficult environment in which GM could try to make these sales," said Pete Hastings, a fixed-income analyst with Morgan Keegan Inc in Memphis, Tennessee. "They may get someone to take these assets off their hands at a fire-sale price, but that's largely dependent on a bailout." Shedding assets was a pillar of GM's plan to boost cash by as much as $20 billion by the end of 2009. Available cash at the end of September fell 23 percent from the end of June, eroding the savings from job cuts and factory closures and helping spur GM to ask for $25 billion in loans for the US industry. GM hadn't found buyers for Hummer, the ACDelco replacement-parts unit and a French transmission factory before saying on Nov 7 that it may not have enough operating cash to last through the end of the year without federal aid. "What this does is just layer a whole other level of uncertainty on a transaction," Warren Feder, a partner at Carl Marks Advisory Group LLC in New York who has advised companies considering bankruptcy, said in an interview. A GM spokesman, Tony Cervone, wouldn't name any suitors on Wednesday, say how much the automaker expected to receive for the three units or specify other assets being considered for sale to meet GM's liquidity goal. "We are approaching any discussions with the assumption that GM is going to be here for a long time," Cervone said. GM has said bankruptcy isn't an option under consideration. Asset sales "will be very challenging given the current business and credit environments," GM said in a Nov 10 regulatory filing. "Moreover, the full impact of many of these actions will not be realized until the second half of 2009 or later, even if they are implemented successfully." Last quarter's $6.9 billion cash burn cut GM's reserves to $16.2 billion as of Sept 30. The automaker says it needs $11 billion to pay its monthly bills and has reported almost $73 billion in losses since 2004, its last annual profit. GM's dwindling cash underscored the urgency of its request for federal aid. GM, Ford Motor Co and Chrysler LLC would receive $25 billion from the Treasury's Trouble Asset Relief Program under a proposal on Wednesday from House Financial Services Committee Chairman Barney Frank. GM gained 16 cents, or 5.5 percent, to $3.08 on Wednesday in New York Stock Exchange composite trading, snapping a streak of five consecutive declines that chopped the value of the shares in half. The stock's 88 percent plunge this year is the most among the 30 companies on the Dow Jones Industrial Average. Financial data on the French plant and on Hummer have been distributed to prospective buyers, and GM is preparing information on the ACDelco unit, Cervone said. It hired Merrill Lynch & Co and Citigroup Inc to help with the sales. Purchases of Hummer SUVs fell 49 percent this year in the US, the biggest decline among any brand across all automakers. The unit's vehicles are assembled at plants in Indiana, Louisiana, South Africa and Russia. The Strasbourg, France, plant makes six-speed automatic transmissions for Cadillac CTS sedans, vehicles at the company's Shanghai GM unit and for Bayerische Motoren Werke AG, a spokeswoman, Sharon Basel, said in an interview. The factory also makes manual transmissions. The ACDelco unit, with annual revenue of about $1.5 billion, makes parts such as batteries, oil filters and windshield wipers and employs about 600 people. GM is also considering another attempt to sell its medium-duty truck business, which makes the Chevrolet Kodiak and GMC TopKick, after a deal with Navistar International Corp fell through in August. Agencies (China Daily 11/14/2008 page16) |
