GM: Selling Assets to Raise Cash May Prove Tough
August 21, 2008
By Michelle Krebs
General Motors' plan to sell assets to raise much-needed cash may be easier said than done.
In July, GM outlined a plan for cutting expenses and selling assets in an effort to conserve and raise cash, which it is burning through so quickly that one investment firm said Wednesday the automaker needed $7.3 billion in fresh capital to pay its bills through 2009.
But also on Tuesday, Navistar International backed out of a deal to buy GM's medium-duty truck unit. And, while GM says it has received much interest in Hummer Division, a number of expected suitors have said no thank you in a variety of languages.
Navistar had agreed in December to buy GM's medium-duty truck business, which includes the Chevrolet Kodiak and GMC TopKick made in Flint, Mich. But on Tuesday, the Illinois-based truckmaker said it had allowed the memorandum of understanding to expire, saying "significant marketplace and economic changes" had prompted its decision. Navistar had said earlier that it was weathering the continued softness in the commercial truck market thanks to demand for heavy-duty and military trucks.
Terms of the proposed purchase were never disclosed so it's not known how much GM would have raised from the sale. Some analysts had placed its value at $500 million. Meantime, GM said it would review strategic options for the business, including continued discussions with Navistar.
Also under strategic review for possible sale or restructuring is Hummer, which has seen sales plummet more than 40 percent this year. But of late, a number of parties that were expected or even rumored to be interested in Hummer have said no they aren't. Among them are India's Mahindra & Mahindra, India's Tata Motors, Russian billionaire Oleg Deripaska and some Chinese automakers.
Hummer General Manager Martin Walsh told dealers via video Wednesday that GM has received "expressions of interest from various entities" but it has not solicited offers nor has it negotiated with any suitors.
But the need to raise more cash is growing, according to a report from Lehman Brother's Brian Johnson. His report says GM needs $7.3 billion in fresh capital to pay its bills through 2009. He predicts GM could burn through $6.9 billion of cash in the second half of 2008 and another $4.4 billion next year. That amount could increase if the U.S. slowdown spills over to the rest of the world.
Posted by Michelle Krebs at 7:21 AM under Business , Commentary , GM | Comments (0) | digg this | Seed Newsvine
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