General Motors is expected to announce a deal today to sell a majority stake in its financing arm, GMAC, to a group of investors led by Cerberus Capital Management for about $8 billion in cash, according to people involved in the negotiations. The complex deal could be worth as much as $14 billion total over time, these people said. þþThe transaction could give General Motors some breathing room at a time when it is under increasing pressure to stabilize its finances, and as investors grow worried that the company could fall into bankruptcy. Still, some analysts question whether the sale of GMAC will be any more than a short-term fix. þþGMAC has been a lone bright spot for G.M., providing badly needed income as it reported deep losses at its automotive unit. Last year G.M. lost $10.6 billion, which would have been even more had the company not earned $2.4 billion at GMAC.þþA spokeswoman for G.M. declined to comment. A spokesman for Cerberus could not be reached.þþWhen talk first surfaced last summer that G.M. might sell a controlling interest in GMAC, analysts estimated it could bring up to $16 billion. That was before the automaker was shaken by a raft of problems, depressing the value of the stake.þþThe GMAC sale is the latest in a series of efforts by the company to raise some cash. Its strategy has been two-fold: G.M. has sold stakes in its own operations while selling stakes it holds in other companies.þþTwo such moves happened last week, when G.M. sold a 78 percent stake in GMAC Commercial Holding Corporation, its real estate venture, to a group of investors headed by Kohlberg Kravis Roberts in a deal that raised $1.5 billion in cash, while GMAC Commercial Holding agreed to pay GMAC for $7.3 billion in loans once the transaction is final.þþMeanwhile, Mitsubishi Motors of Japan said it was in talks to buy some of G.M.'s shares in Isuzu, another Japanese auto company, for $340 million. þþThe long-awaited GMAC sale will be ÿa relief to investors,ÿ said John Casesa, a managing partner at Casesa Strategic Advisors, a New York investment firm. ÿIt buys some time to solve the problems at the auto company.ÿ þþBut he and other analysts have criticized the deal as a short-term solution that could come back to haunt the company. ÿG.M. is having to throw furniture into the fireplace to keep the house warm,ÿ Mr. Casesa said. þþOn Friday, G.M.'s biggest parts supplier, the Delphi Corporation, asked a bankruptcy court judge for permission to cancel its labor contracts and impose sharply lower wages on members of six unions, including its largest, the United Automobile Workers. G.M. owned Delphi until 1999 and is liable for the pension and health care benefits of workers who were at G.M. before the spinoff. þþG.M. estimates its liability from the Delphi bankruptcy will be anywhere from $5.5 billion to $12 billion, meaning that the GMAC sale may not be enough to cover it. þþTwo weeks ago, G.M. said it would offer all 113,000 of its workers and 13,000 Delphi workers up to $140,000 if they would leave the company, but it has not estimated precisely what that would cost.þþDelphi also said last week that it expected G.M. to offer incentives of $50,000 to its U.A.W. members if they would accept a significant pay cut. Otherwise, Delphi said, it would impose wages of $12.50 an hour. If Delphi were to do so, the U.A.W. warned, it could face a strike that could shut down G.M. and lead to its own bankruptcy filing.þþStandard & Poor's Ratings Services placed G.M. on credit watch with negative implications last week, meaning that its debt rating could be cut even deeper into junk. The move came after G.M. disclosed that it might have trouble tapping a line of credit and might have to renegotiate its terms. þþRobert Schultz, an auto industry analyst at S.& P., said the sale of a stake in GMAC would have a ÿneutral impactÿ on G.M. While it would bolster the company's cash, Mr. Schultz said the situation at Delphi ÿseems to be unfolding in a potentially fairly negative way.ÿþþThe sale of GMAC would end a months-long auction for the unit. Besides Cerberus, a group led by Kohlberg Kravis Roberts had vied for it.þþ
Source: NY Times
