Bloomberg News

General Motors Considers `Several Options' on GMAC, Chief Says

March 01, 2006

General Motors Corp., which has reported five consecutive quarterly losses, is considering ``several options'' for the sale of the General Motors Acceptance Corp. financing and insurance division, Chief Executive Officer Rick Wagoner said.

``It's a fairly complex situation and it's not just a question of realizing value from an asset, which is part of the deal, but the more interesting aspect is the business of that unit is very tightly involved with the business of the auto company,'' Wagoner said at the Geneva Motor Show.

General Motors has been searching for a buyer of a majority stake in GMAC to raise cash and regain an investment-grade credit rating amid losses at its main automotive business. Moody's Investors Service said last month the delay in the disposal suggests ``difficulty'' in setting sale terms that would boost Detroit-based GM's credit quality.

Any transaction would need to take account of the relationship between the automotive business and the financing operations, Wagoner said today. Discussions are ``proceeding,'' Wagoner added, without providing details about possible buyers or a time for the sale.

GM's liquidity is ``massive'' at the automotive and financing operations and the company doesn't need to sell GMAC before next year, Wagoner said. General Motors has more than $19 billion in cash, not including GMAC cash balances.

Assets are structured so that maturity is shorter than the maturity of the company's liabilities, helping maintain a positive cash flow in the event the carmaker doesn't expand its business.

Fitch's Deadline

Fitch Ratings on Feb. 8 gave General Motors until March 31 to find a buyer before considering a cut in the unit's credit rating, reiterating a call it made a week earlier. The company's bonds were unchanged today.

GMAC, which holds more than 80 percent of GM's bonds and listed $142 billion in unsecured debt at the end of September, has been rated higher than its parent by Fitch and Standard & Poor's since October. Moody's, S&P and Fitch, the world's three biggest credit-rating companies, all said Feb. 3 that they're unlikely to give GM's finance unit an investment-grade rating unless it's partly owned by a bank.

GM's worldwide auto operations lost $4.78 billion in the fourth quarter. That has put pressure on Wagoner to sell part of GM's most profitable unit. GMAC, which makes loans and sells insurance, had a fourth-quarter profit of $614 million. GM has earned more money from loans and insurance than building autos since 2002.

To contact the reporters on this story: Jeremy van Loon in Geneva at jvanloon@bloomberg.net; Alan Katz in Geneva at akatz5@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.


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