GM will sell stake in Suzuki to raise capital

Associated Press

Cash-strapped General Motors Corp. will sell its entire stake in Suzuki Motor Corp. for $230 million, the automaker’s latest move to stay afloat while awaiting a decision on government aid for the industry.

Suzuki said Monday that it would buy back the 3% stake from the U.S. auto giant, which is seeking a $25-billion government lifeline, together with Ford Motor Co. and Chrysler, to weather the deepening economic crisis.

Although the sale is indicative of GM’s near-term liquidity challenges, the proceeds are not very meaningful, Buckingham Research Group analyst Joseph C. Amaturo said.


“GM is expected to burn $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 frozen credit and the worst sales slump in more than 25 years, GM has warned that it might not survive through year’s end without the U.S. government’s financial support.

Suzuki said GM’s stake sale was necessary for the 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. He said that he was in close contact with GM chief Rick Wagoner and that the two companies would keep joint projects, including the development of hybrid vehicles and a joint venture for sport utility vehicles in Canada.

GM lost $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.