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GM to announce Isuzu stake sale

GM has been discussing selling its stake in its long-time Japanese partner to raise cash to turn its loss-riddled business around.

india Updated: Apr 11, 2006 15:19 IST

General Motors Corp. and Isuzu Motors Ltd said on Tuesday they would hold a news conference at 5 pm (0800 GMT) in Tokyo, widely expected to concern the US auto giant's sale of its 7.9 per cent stake in the Japanese truck maker.

Isuzu President Yoshinori Ida and the head of GM's Asia-Pacific operations, Troy Clarke, will attend, they said, disclosing no other details.

The world's biggest auto maker has been discussing selling its stake in its long-time Japanese partner to raise cash to turn its loss-riddled business around, after similar moves with Subaru maker Fuji Heavy Industries Ltd. and Suzuki Motor Corp.

Japanese trading houses Mitsubishi Corp and Itochu Corp, and Mizuho Corporate Bank have all said they had been approached by GM about a possible purchase. All three companies said they would make an announcement at the same time concerning the purchase of shares.

Japanese media have reported Mitsubishi Corp and Itochu would each take a 3.5 per cent stake from GM, while the banking unit of Mizuho Financial Group Inc. would pick up the remaining 0.9 per cent.

GM and Isuzu first formed an equity alliance in 1971, and supply each other with trucks. GM also buys nearly 200 billion yen ($1.7 billion) worth of diesel engines and other parts from Isuzu annually.

GM is under severe time pressure to fix its core automotive business, having announced sweeping restructuring plans to slash 30,000 union jobs and close 12 plants through 2008. It lost $10.6 billion in 2005 as it faced high labour and commodities costs and lost market share at home to foreign rivals.

Strapped for cash, GM late last year let go of its entire 20 per cent stake in Fuji Heavy, following that with a sale of 17 per cent of Suzuki Motor. It still holds a 3 per cent stake in the Japanese maker of compact cars.

GM's sale of shares in Isuzu, regarded as its strongest strategic partner in Japan, would demonstrate the urgency of the Detroit maker's task to improve its cash flow, given the relatively modest proceeds expected from the transaction.

At Tuesday's closing share price, GM's stake in Isuzu would be worth $334 million.

Analysts have said Isuzu would eventually need a strategic partner in the industry to stay competitive. All three of Japan's other major truck makers are now allied with a partner, after Nissan Diesel Motor Co's link-up with Sweden's Volvo AB last month.

Hino Motors Ltd, part of the Toyota Motor group and a spin-off from Isuzu back in 1942, has a broad, non-equity alliance with Sweden's Scania AB, while unlisted Mitsubishi Fuso Truck & Bus Corp. is majority owned by DaimlerChrysler AG, the world's top truck maker.

Before the news, shares in Isuzu ended up 2.56 per cent at 440 yen, Mitsubishi Corp gained 0.56 per cent to 2,685 yen, and Itochu was flat at 1,069 yen.

The main Nikkei average closed down 0.22 per cent.

First Published: Apr 11, 2006 15:19 IST