GM Sells Controlling Interest in GMAC
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Disciple
Joined: May 2004
Posts: 270
From: Toronto, Ontario, Canada (20 min. down the road from the "Shwa"!)
GM Sells Controlling Interest in GMAC
... in order to raise cash for employee buyouts and to bring out new models.
Here's the cut and paste, since the whole article is available just to subscribers.
http://www.canada.com/nationalpost/f...1-4d23b47e6272
Best regardSS,
Elie
Here's the cut and paste, since the whole article is available just to subscribers.
http://www.canada.com/nationalpost/f...1-4d23b47e6272
GMAC sale buys auto giant time
Cerberus group gets control
Rick Wagoner, GM's chairman, said yesterday the Cerberus deal will allow the automaker to restructure its business.
Peter Morton, Washington Bureau Chief, Financial Post
Published: Tuesday, April 04, 2006
WASHINGTON - General Motors Corp.'s long-awaited sale of control of its profitable financing asset yesterday gives the struggling automaker a cash infusion and vital time to try to turn its Detroit-based operation around, analysts said.
At the same time, the US$7.4-billion sale of 51% of General Motors Acceptance Corp. by GM means the buyers, led by Cerberus Capital Management LP, got a bargain, the analysts said.
"We put [the sale] at mildly negative," said Kam Hon, managing director of Toronto's Dominion Bond Rating Service.
Mr. Hon said from Australia yesterday that he was pegging GM's bonds at B high with a negative trend while maintaining GMAC at under review with "developing implications."
GM sold controlling interest of its financing arm to the New York-based private equity firm as part of an overall strategy to return to profitability after losing US$10.6-billion last year in the fiercely competitive automobile market.
"It's positive because they get a pile of cash," Mr. Hon said in a conference call from Sydney.
However, he said, the sale of GMAC when GM was under financial pressure meant that "GM cannot realize the full value of their most profitable asset."
The world's biggest automaker said yesterday its U.S. sales fell 14% to 365,375 vehicles last month as it builds a cash reserve to try to develop new consumer-friendly models.
"In the context of history, the last six months are going to prove to be pivotal," Rick Wagoner, GM's chairman, said at a news conference.
"This is about restructuring our business so we can be robustly profitable in the future, so we're not so balanced on a razor's edge [that] if gas prices go up, you don't make any money, if your sales go down 10% you don't make [any money]," he said.
The sale of GMAC will give GM enough cash for Mr. Wagoner to finance the buyout of 30,000 unionized workers and develop new lines of vehicles to compete with such rivals as Toyota Motor Corp.
Both stock markets and analysts were less than enthusiastic about the sale with GM's shares falling US$1.13, or 5.31%, to US$20.14 despite a huge leap in other stocks on Wall Street yesterday.
Moody's Investors Service said it may downgrade GMAC's debt, while Standard & Poor's said any increase in the unit's rating would likely leave it below investment grade. "Without the investment-grade rating, it means it was good news, but not great news,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tenn. "We still applaud GM for being able to affect a complex transaction that should benefit them in the long run."
Mr. Hon from DBRS said that despite Mr. Wagoner's five-month campaign to restore GM's lost lustre, there are still some serious problems facing the automaker, including a possible strike at Delphi Corp., GM's spun-off parts manufacturer.
If there is a strike, he said, GM's cash would quickly be eaten up. "Then all bets are off," he said.
As part of yesterday's deal, GM and the Cerberus group will enter into a series of 10-year agreements that assure GMAC will continue to support GM auto sales. GM will have the option to buy back the automotive-finance operations for up to 10 years after the sale if GM has an investment-grade credit rating and meets other requirements.
An initial US$7.4-billion from the Cerberus group will be combined with about US$2.7-billion in cash distribution to GM from the conversion of GMAC and its subsidiaries to limited liability corporations.
GM has made more money from automobile loans and mortgages than from building cars and trucks since 2002. Last year, its auto unit lost US$12.9-billion and GMAC showed a profit of US$2.4-billion.
Mr. Wagoner's strategy calls for GM to spend about US$8.7-billion on capital expenditures this year, an increase from US$7.9-billion last year, to win back unhappy American car buyers.
Cerberus group gets control
Rick Wagoner, GM's chairman, said yesterday the Cerberus deal will allow the automaker to restructure its business.
Peter Morton, Washington Bureau Chief, Financial Post
Published: Tuesday, April 04, 2006
WASHINGTON - General Motors Corp.'s long-awaited sale of control of its profitable financing asset yesterday gives the struggling automaker a cash infusion and vital time to try to turn its Detroit-based operation around, analysts said.
At the same time, the US$7.4-billion sale of 51% of General Motors Acceptance Corp. by GM means the buyers, led by Cerberus Capital Management LP, got a bargain, the analysts said.
"We put [the sale] at mildly negative," said Kam Hon, managing director of Toronto's Dominion Bond Rating Service.
Mr. Hon said from Australia yesterday that he was pegging GM's bonds at B high with a negative trend while maintaining GMAC at under review with "developing implications."
GM sold controlling interest of its financing arm to the New York-based private equity firm as part of an overall strategy to return to profitability after losing US$10.6-billion last year in the fiercely competitive automobile market.
"It's positive because they get a pile of cash," Mr. Hon said in a conference call from Sydney.
However, he said, the sale of GMAC when GM was under financial pressure meant that "GM cannot realize the full value of their most profitable asset."
The world's biggest automaker said yesterday its U.S. sales fell 14% to 365,375 vehicles last month as it builds a cash reserve to try to develop new consumer-friendly models.
"In the context of history, the last six months are going to prove to be pivotal," Rick Wagoner, GM's chairman, said at a news conference.
"This is about restructuring our business so we can be robustly profitable in the future, so we're not so balanced on a razor's edge [that] if gas prices go up, you don't make any money, if your sales go down 10% you don't make [any money]," he said.
The sale of GMAC will give GM enough cash for Mr. Wagoner to finance the buyout of 30,000 unionized workers and develop new lines of vehicles to compete with such rivals as Toyota Motor Corp.
Both stock markets and analysts were less than enthusiastic about the sale with GM's shares falling US$1.13, or 5.31%, to US$20.14 despite a huge leap in other stocks on Wall Street yesterday.
Moody's Investors Service said it may downgrade GMAC's debt, while Standard & Poor's said any increase in the unit's rating would likely leave it below investment grade. "Without the investment-grade rating, it means it was good news, but not great news,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tenn. "We still applaud GM for being able to affect a complex transaction that should benefit them in the long run."
Mr. Hon from DBRS said that despite Mr. Wagoner's five-month campaign to restore GM's lost lustre, there are still some serious problems facing the automaker, including a possible strike at Delphi Corp., GM's spun-off parts manufacturer.
If there is a strike, he said, GM's cash would quickly be eaten up. "Then all bets are off," he said.
As part of yesterday's deal, GM and the Cerberus group will enter into a series of 10-year agreements that assure GMAC will continue to support GM auto sales. GM will have the option to buy back the automotive-finance operations for up to 10 years after the sale if GM has an investment-grade credit rating and meets other requirements.
An initial US$7.4-billion from the Cerberus group will be combined with about US$2.7-billion in cash distribution to GM from the conversion of GMAC and its subsidiaries to limited liability corporations.
GM has made more money from automobile loans and mortgages than from building cars and trucks since 2002. Last year, its auto unit lost US$12.9-billion and GMAC showed a profit of US$2.4-billion.
Mr. Wagoner's strategy calls for GM to spend about US$8.7-billion on capital expenditures this year, an increase from US$7.9-billion last year, to win back unhappy American car buyers.
Elie
Registered User
Joined: Nov 1999
Posts: 2,801
From: Nashville, TN
Re: GM Sells Controlling Interest in GMAC
I understand the need for cash now, but I hope they don't come to regret this down the road. Seems like cutting off your nose to spite your face. Not that they can't buy back the controlling interest once business turns around, but all the eggs are in one basket now so to speak.
Registered User
Joined: May 2004
Posts: 248
Re: GM Sells Controlling Interest in GMAC
I think this is the media's "opinion" ( buyouts), GM and the union have funds set aside and I dont think these buyouts will be messing with the money from the GMAC sale. I doubt the media will report info that Im right, But Ford was to have used its seperate accounts to do its buyouts.
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