GM, Suzuki to continue making, selling cars together
James B. Treece
Automotive News / March 6, 2006 - 8:57 am
TOKYO -- General Motors and Suzuki Motor Corp. will continue making and selling cars together even after GM sells most of its stake in Suzuki.
"The strategic alliance will continue," says GM Asia Pacific President Troy Clarke.
On Tuesday, March 7, GM plans to sell 17.4 percent of Suzuki into the open market, as Suzuki concurrently buys back about the same number of shares. The move will leave GM with 3 percent of Suzuki.
GM will raise about $2 billion in cash from the sale. Clarke predicted GM will book a pretax gain of between $550 million and $700 million.
GM, which lost $8.6 billion last year, is selling the shares to raise money. "It's a smart way to generate some cash that could fund other growth initiatives," Clarke says.
Production ventures remain
Suzuki will keep its 11 percent stake in GM Daewoo Auto & Technology Co. in Korea. Suzuki and GM will continue to jointly own CAMI Automotive Inc., a car-making venture in Ingersoll, Ontario. Both will continue making vehicles for sale by both GM and Suzuki.
CAMI assembles the Chevrolet Equinox and Pontiac Torrent SUVs. It will add the Suzuki XL-7 SUV in the fall.
Suzuki's contract to buy GM Daewoo cars for sale in North America covers the life of the current models. At the end of those models' life cycles, Suzuki could develop its own replacements or contract to buy the next-generation cars from GM Daewoo, Clarke says. But, he adds, "I think we'll have a product relationship with Suzuki for a long time."
Clarke won't comment directly on whether GM might also sell all or part of its 12-percent stake in Isuzu Motors Ltd. "We've made no decision," he says.
"Isuzu is also a core alliance partner," he says. "As a matter of good business practice, we continually review our investments."
Long-term effort
Clarke denies that the Suzuki share sale is the result of calls by Jerome York, a Kirk Kerkorian lieutenant, for GM to sell off its stakes in affiliated carmakers.
Discussion within GM about selling the Suzuki shares began "a number of weeks" before York's public call for the sale, he says. The GM board approved negotiations with Suzuki over the terms of the sale at its Feb. 6 board meeting, he says.
At that board meeting, GM also offered a seat on its board to York.
GM originally bought 5 percent of Suzuki in the spring of 1981. After that stake dipped to 3.5 percent due to Suzuki's issuing additional shares, GM bumped its stake up to 10 percent in 1998, then to 20 percent in 2001.
At the time of those increases, GM's then-Chairman Jack Smith and other executives spoke of using Suzuki to develop inexpensive vehicles for sale in China. But then GM bought part of the assets of bankrupt Daewoo Motor and turned instead to the Korean carmaker to design its small cars for China and elsewhere.
