GM deal with investment group to bring in $14 billion over 3 years

WASHINGTON — General Motors said it has reached a deal with a private investment group to sell a 51 percent stake in its GMAC financing subsidiary, a transaction that will bring in $14 billion of needed cash during the next three years.

The investor group is led by Cerberus Capital Management and includes Citigroup and Aozora Bank. In a separate transaction last week, GM agreed to sell a 78 percent stake in GMAC's corporate mortgage division for $8.8 billion.

GM is selling the subsidiary so that GMAC's credit rating will no longer be tied to GM's rating, which has junk status. Better ratings would bring lower financing costs and greater earnings in the long-term, GM has said.

GM sales fell almost 15 percent in March, according to figures released Monday. It was more bad news for the automaker, which lost $10.6 billion last year and is suffering from a wide-range of financial and labor troubles. GM shares were down $1.13, or 5.3 percent, to close at $20.14.

GM Chief Executive Rick Wagoner called the GMAC deal a "milestone" in the journey to turn around the world's largest automaker.

The GMAC sale follows several other high-impact moves by Wagoner to fix GM's beleaguered North American operations.

Separately, Wagoner said Frederick Henderson, GM's newly installed chief financial officer, is turning most of his attention to negotiations with auto-parts supplier Delphi and the United Auto Workers union.

Delphi, which filed for bankruptcy protection in October, moved Friday to have its labor contracts voided. The action was denounced by union leaders who broke off talks with Delphi. Delphi is a former GM subsidiary and GM's largest supplier of vehicle components.

"If we can work with the union ... it's better," Wagoner said during a news conference in Detroit.

In a statement, Wagoner said the GMAC deal "provides significant liquidity to support our North American turnaround plan, finance future GM growth initiatives, strengthen our balance sheet and fund other corporate priorities."

GMAC's earnings totaled just under $2.8 billion of net income last year. Of the total, about $1 billion was generated by auto financing, GMAC's mortgage units brought in $1.4 billion and its insurance business accounted for $417 million.

As part of the deal, the automaker said GM and GMAC will enter into a number of 10-year agreements under which GMAC will continue to support GM's automotive operations, GM said. GM announced its intention to sell GMAC in October. GM expects the deal to close in the fourth quarter.

GM said the GMAC transaction is subject to a number of federal and international regulatory approvals, including from the Pension Benefit Guarantee Corp., the federal agency that monitors corporate America's pension system.

Cerberus, based in New York City, has $18 billion in assets under management for individual and institutional investors, including state and corporate pension funds, insurance companies, foundations and endowments.

Toyota reports

highest monthly sales

While GM sales continue to slump, rival Toyota reported its highest ever monthly sales.

GM car sales dropped 15 percent in March and 22 percent compared with March 2005 as the automaker eased off on sales to rental fleets, while truck and SUV sales were down 9 percent despite brisk sales of the redesigned Chevrolet Tahoe, which saw a 20 percent increase.

Paul Ballew, GM's executive director of market and industry analysis, said the results reflect the company's goals of cutting sales to daily rental fleets — which have lower margins and hurt automakers' residual values — and relying less heavily on incentives.

Sales at Toyota rose 7 percent for the month, led by a 15 percent increase in truck and sport-utility-vehicle sales. While sales of full-size SUVs sank — the Toyota Land Cruiser was down 31 percent from a year ago — sales of the midsize 4Runner rose 15 percent and sales of the redesigned RAV4 crossover shot up 117 percent. Toyota's sales also were up 7 percent for the quarter.

Honda said its sales were up 4 percent for the month, largely on the strength of the hybrid Honda Insight, which saw sales climb 41 percent, and the Ridgeline pickup, which was up 38 percent.

Sales of Chrysler, Dodge and Jeep vehicles were up nearly 2 percent for the month, partly on the strength of the new Dodge Caliber compact. Chrysler's sales were up nearly 3 percent for the first three months of the year compared with the first quarter of 2005.

Ford said its sales fell 5 percent in March, largely because of waning interest in its SUVs. Sales of Ford, Lincoln and Mercury cars were flat compared with March 2005, but truck and SUV sales were down 7 percent. The Ford Explorer took a 25 percent dive.

Nissan said sales were off 3 percent in March, mostly due to a drop in car sales. Nissan's sales were flat for the quarter.

The Associated Press