GM sells remaining interest in Suzuki

General Motors has announced that the corporation will sell its share in Suzuki -- estimated at 2.6 per cent of the total value -- but the giant corporation will continue to cooperate with the Japanese company in the development of hybrid and fuel cell technology.

The move divests GM of over 16 million shares in Suzuki and is expected to raise $230 million based on the current market price for the shares. Suzuki is now the latest Japanese company to go it alone following the sale of GM equity -- other companies being notably Isuzu and Subaru.

As a means of raising capital, the sell-off is a sign of expediency, since the funds won't go far in keeping the automotive behemoth afloat. GM has also said that it will discuss reacquiring shares in Suzuki with that company's management team, if or when the current financial crisis is resolved.

"We highly value our strategic relationship with Suzuki," said Rick Wagoner, GM's chairman and chief executive officer (pictured).

"Despite the sale of our remaining Suzuki shares, this action will have no impact on our existing bilateral business relationships. We look forward to continue building on our success to date with our long-term partner."

The divestiture may hold off Chapter 11 proceedings long enough for a government-led package to be introduced in order to keep 'the Big Three' operating. This initiative has its supporters in the US Congress (the Democrats) and its opponents (the Republicans).

According to the respected industry organ, Automotive News, the Republican stance has backing from economists and financial experts. The argument there is that any assistance package would set a precedent for support of other -- less deserving -- corporate bodies and the package would stretch the government's resources to the limit. These experts regard the potential collapse of the financial system as much more worrying than the collapse of the American car manufacturers.

At least one of the economists cited in the Automotive News report reckons that aid to the industry now would fail to redress some of the systemic problems GM has failed to tackle in the past -- and without changing the modus operandi, the corporation would be begging for more aid within six months.

Under American law, Chapter 11 proceedings would allow the corporation to continue operating, but would force it to make decisions and adopt strategies such as would be unpalatable in happier times. The argument against Chapter 11 as a means out of the current impasse is that the company is technically insolvent -- and buyers tend not to buy warranted vehicles from a company likely to go under at any time.

A Democrat-proposed plan to buoy the industry with $25 billion on loans goes before Congress later this week. Congress has already approved $25 billion worth of loans for the American manufacturers to re-equip factories for the production of more fuel-efficient cars.

$700 billion has been set aside to rescue financial institutions, but the Democrats would like to see some of that money diverted to the automotive industry. As recently as November 7, GM reported that for the third quarter of 2008, it had posted before-tax losses in every region other than Latin America. In the Asia/Pacific region, GM posted a US $6 million loss for the quarter, which is almost good news by comparison with what is happening in Europe and North America.

To comment on this article click here