GM The bottom feeders go fishing

NEW YORK :
General Motors Corporation Last: 21.27+0.21+1.00% 4:15am 04/03/2006

GM Have today confirmed plans to sell a 51% stake in its GMAC unit for $14 billion to a team of private equity firms led by Cerberus Capital Management. GM plans to close the sale in the fourth quarter. The auto giant expects $10 billion in cash at the closing and $4 billion over the next three years.

Named after a three-headed dog that guards the gates of hell, Cerberus Capital Management's investment strategy is to keep companies from flaming out. Holdings include a 49% stake in Japanese bank Aozora, US tech firm and supplier of enterprise software SSA Global Technologies, and cable operator Galaxy Cable. The firm often injects capital into retail ventures -- extinct music retailer Wherehouse Entertainment was a former investment, as was beleaguered Hong Kong fashion house Esprit de Corp (now known as Esprit Holdings More recently, subsidiary Riley Property acquired real estate services firm LNR Property,l and Cerberus paid about $2.3 billion for MeadWestvaco's paper business, forming NewPage Corporation.

Sounds like a desperate throw letting in the bottom feeders ..... especially with the problems of strikes and supply problems at Delphi threatening.

UPDATE MONDAY 3/4/06 13.00 GMT

G.M. to Sell Majority Stake in Finance Unit
By ANDREW ROSS SORKIN and MICHELINE MAYNARD NYT (subscription) April 3, 2006

....Meanwhile, 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.

G.M. estimates its liability from the Delphi bankruptcy will be from $5.5 Bn. to $12 Bn., (!!!! - hefty margin of error there) which means the proceeds of the GMAC sale may not be enough to cover it.

Two 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. (Steering blind ?)

Delphi said last week that it expected G.M. to offer incentives of $50,000 to its U.A.W. members on acceptaance of a significant pay cut. Otherwise, Delphi 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.

Standard & 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.


... A group led by Kohlberg Kravis Roberts is also understood to have negotiated to buy GMAC.

UPDATE APRIL 4th 2006 The Independent

Quoted today is Deutsche Bank's Rod Lache who was among the analysts expressing scepticism at the Cerberus deal.

He said it could "wind up being another strategic error", since it cuts in half the cash coming in from GM's most profitable business. Mr Lache said: "A sale could also ultimately turn into another large-scale value transfer to the United Auto Workers union, since a larger cash position reduces the UAW's need to make additional concessions." (and no doubt hold out for more money).

He added: "The bottom line is that we believe GM deciding to cede control of this strategic business reveals how perilous GM's situation has become."