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GM seeking to sell Isuzu Motors shares

Japanese trading houses Mitsubishi Corp and Itochu Corp said earlier they had received requests to buy GM's holdings in Isuzu.
None | By Reuters, Tokyo
PUBLISHED ON MAR 30, 2006 04:54 PM IST

Struggling US auto giant General Motors Corp said on Thursday it is discussing a sale of its stake in Japanese truck maker Isuzu Motors Ltd, another step in its restructuring to cope with heavy losses.

GM's sale of most of its stake in Japanese car maker Suzuki Motor Corp earlier this month for much-needed cash had raised speculation of a sale of its Isuzu holdings. Last year GM sold its entire 20 per cent stake in another Japanese auto maker, Fuji Heavy Industries Ltd.

The Detroit-based auto maker lost $10.6 billion in 2005 as it faced high labour and commodities costs, loss of US market share to foreign rivals and sluggish sales of sport-utility vehicles -- typically its largest profit generators.

GM currently holds about 90 million shares, or 7.9 per cent, in Isuzu, worth some 38 billion yen ($320 million) based on Isuzu's closing price on Wednesday.

GM said in a statement it is discussing the possible sale in a private transaction and it would not expect any sale of its Isuzu shares to have any effect on their strategic alliance.

Isuzu said it has agreed to discuss the sale of GM's stake in the Japanese truck maker upon the GM's request.

"We recognise GM is at a crucial point in turning its North American business to profit, and is continuously reviewing its portfolio," Isuzu said in a statement.

"We understand GM's need to strengthen its balance sheet and liquidity and agreed to discuss with GM," it said.

Shares in Isuzu gained 3.99 per cent to 443 yen after the news, which was initially reported in the Nihon Keizai business daily.

The news generated optimism that Isuzu would be better off after cutting its ties with the struggling auto maker, said Ken Masuda, senior dealer in equities at Shinko Securities.

"You have to think of this as a plus ... General Motors is not doing well at the moment," he said.

Japanese trading houses Mitsubishi Corp and Itochu Corp said earlier they had received requests to buy GM's holdings in Isuzu.

Spokesmen for Mitsubishi and Itochu said they were considering the GM request but nothing had been decided yet.

Mitsubishi sells Isuzu trucks in Thailand and Itochu sells them in North America. Mitsubishi currently holds a 0.2 per cent stake in Isuzu, while Itochu holds 0.7 per cent. Both firms also own preferred shares in Isuzu.

A spokesman for Mizuho Corporate Bank, which holds a 2.8 per cent stake in Isuzu, also said it had received a request to buy GM's Isuzu holdings, and was considering it.

Mizuho Corporate Bank is part of Mizuho Financial Group.

The Nihon Keizai newspaper said GM may keep a small stake in Isuzu and the two firms plan to continue their business tie-up, including the supply of trucks to each other.

Shares in Mitsubishi rose 1.17 per cent, while Itochu gained 2.02 per cent.

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