GM to sell its full stake in Suzuki to raise cash

The automaker also delays dealer reimbursements to save cash.

TOKYO (AP) — Cash-strapped General Motors Corp. will sell its entire stake in Suzuki Motor Corp. for 22.37 billion yen ($230 million), the automaker’s latest move to stay afloat while awaiting a decision on government aid for the industry.

Suzuki said Monday it would buy back the 3.02 percent stake from the American auto giant, which is seeking a $25 billion government lifeline, together with Ford Motor Co. and Chrysler LLC, to weather the deepening economic crisis.

While 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 in a note to investors.

“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.

In other news, GM said it will delay reimbursing its dealers for rebates and other incentives later this month, an indication that the company is starting to have cash-flow problems.

Company spokesman John McDonald said Monday that payments due Nov. 28 will be made Dec. 11, while those due Dec. 4 will be paid Dec. 18. The normal schedule will resume after that.

McDonald says the delays are among several measures designed to help the company conserve cash. But restructuring expert Van Conway says the company must know that it’s in danger of running low on cash between Nov. 28 and Dec. 18.

GM and its Detroit counterparts are seeking $25 billion in government loans. The automaker has said it could reach the minimum amount of cash needed to run the company before the end of the year.

Hit by the worst sales slump in more than 25 years and frozen credit, 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 ailing 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 in a statement. He said he was in close contact with GM chief executive Rick Wagoner, and the two companies would keep joint projects, including the development of hybrid vehicles and a joint venture for sports utility vehicles in Canada.

The GM-Suzuki partnership dates to 1981 but those ties loosened after GM sold a 17 percent stake in Suzuki in 2006, leaving it with 3 percent.