GM unloading majority of GMAC; announcement expected today.

[nadepalma]

Source: http://www.detnews.com/apps/pbcs.dll...0405/1121/AUTO

GM close to selling finance unit:
Unloading majority stake in GMAC to investors is expected to generate $14B in cash for automaker.

Associated Press /

April 3, 2006

DETROIT -- General Motors Corp. was expected to announce today that it is selling a majority stake in its finance arm to a private investor group, the Wall Street Journal reported.

The group, led by Cerberus Capital Management, will pay about $8 billion for the stake in General Motors Acceptance Corp., the newspaper said Sunday in a report on its Web site, citing sources familiar with the matter.

Cerberus is joining investors, including Citigroup Inc.'s private-equity unit, to bid for GMAC, the sources added. The group led by New York-based Cerberus offered about $11 billion in January for 51 percent of GMAC, a provider of auto loans, insurance and mortgages, one source said.

GM spokesman Jerry Dubrowski told the Associated Press the report was speculation and declined to comment. Cerberus Chief Operating Officer Mark Neporent didn't return a call seeking comment.

The transaction is expected to generate a total of $14 billion in cash for GM. The additional money will come as some assets are monetized over time through a series of complex adjustments that will transfer additional value to GM from GMAC.

"The plus is the $11 billion that GM would get from the deal right now," said David Healy, an analyst at Burnham Securities Inc., who owns GMAC notes.

"The minus is the billions of dollars that GM has been getting from GMAC would be cut in half."

Last week, a group led by Kohlberg Kravis Roberts & Co. paid $1.5 billion for 78 percent of GMAC Commercial Holding Corp.

The unit repaid $7.3 billion in outstanding loans to GMAC.

Despite the boost GMAC has given GM's bottom line, the struggling automaker has been trying to sell a 51 percent stake in GMAC to raise cash and restore the division's debt ratings, which were downgraded along with GM to junk status last year. A rating below investment grade makes it harder for GMAC to borrow money.

Besides auto financing, GMAC provides mortgage lending and real estate services.

The division generated about $3 billion in profit last year.

GM, the world's largest automaker, is under enormous pressure to reduce its losses.

It recently had to increase its reported 2005 loss by $2 billion to $10.6 billion and has been losing U.S. market share due to increasing competition from Asian automakers.

Cerberus was founded in 1992 by Stephen Feinberg and William Richter.

The firm was part of a group that this year agreed to buy U.S. grocery chain Albertson's Inc. for about $9.8 billion.

Bloomberg News contributed to this report.

[nadepalma]

I think this is different from the deal that was announced a week or more ago on GMAC's Commerical Holing Corp that was reprorted HERE by 5 watt. In that report, GM was getting north of $9 Billion for a 78% stake in the company. That particular division was then to be renamed Capmark Financial Group Inc. to reflect the sale.

This is altogether different news. This is GMAC itself. Unless, I over looked something, that means if this deal (along with the other one) goes through and GM sells just over half of it's stake, they will have roughly $20 Billion in liquid capital before taxes.

All I have to say is, that I hope that GM doesn't sell off the rights to the GMAC name with this majority sale - that is if the three groups who are looking to buy the name have an interest in changing the name. GM should retain the rights to the name in case something should go south and then they can always set up shop elsewhere. Secondly, I would hope that GM has some sort of a clause in there that would allow them to buy back a percentage of their shares if their balance sheets improve in the future. That would at least allow them to get control back once the company's health improves.

Just my perspective.

[kenman923]

So now GM will have to hit a home run with new products. Maybe GM buying Toyota is not too far from reality.

[steverino]

Just hope they don't burn through the $20 billion on a Delphi strike. It would be tantamount to flushing billions down the toilet.

[mikee]

Originally Posted by kenman923

So now GM will have to hit a home run with new products. Maybe GM buying Toyota is not too far from reality.

Dude, are you smoking "Crack"?? Dah, G.M. is losing money and selling off everything that is not major to the core of daily business, you really think they can afford to buy Toyota, when they sold off shares of Subaru, Suzuki. Toyota has enough money to buy Ford, G.M. and Chrysler without blinking. But Toyota would never buy G.M. and absorb their problems along with the contracts with the UAW.

[sky-raptor]

For those of us with personal GMAC accounts ... should we take out all of our money in our accounts?

[ProjectRS]

Originally Posted by mikee

Toyota would never buy G.M. and absorb their problems along with the contracts with the UAW.

I have to agree

[steverino]

Originally Posted by sky-raptor

For those of us with personal GMAC accounts ... should we take out all of our money in our accounts?

I would think it would be safer now with less reliance on GM. I just hope the new owners don't drop the interest rate to the level of what banks are offering.

[VibenPontiac]

Originally Posted by kenman923

So now GM will have to hit a home run with new products. Maybe GM buying Toyota is not too far from reality.

And now they'll have the focus to actually suceed in hitting home runs!! The product is the car or truck, not the method of financing - its General Motors, not General Financing!!

[ScottS]

So does this make it harder for GM to offer special financing incentives on slow selling vehicles or end of year closeouts?

[VibenPontiac]

Originally Posted by ScottS

So does this make it harder for GM to offer special financing incentives on slow selling vehicles or end of year closeouts?

Doubtfully - they still own 49% of the company and I'm sure a special relationship will continue to exist. It does mean that GM will have to maintain the relationship though rather than just having it in the bag. GM will continue to prove to be a strong source of revenue for GMAC regardless of ownership.

[TuffG929]

They already made the deal. It's all over Bloonberg TV. Apparently they are getting $14Billion from a group consisting of Citigroup, Cerberus, and some Japanese bank.

[cfch3399]

And we thought that 2005 was a bad year, financially speaking. 2006 numbers should be disastrous.

"GM has made more money from auto loans and mortgages than from building cars and trucks since 2002. Last year, the auto unit lost $12.9 billion and GMAC earned $2.4 billion, according to revised figures filed by the automaker last week." from Bloomberg

[doh]

next glitch

DETROIT, March 31 (Reuters) - A consortium led by hedge fund Cerberus Capital Management LP does not have to close a deal it signed with General Motors Corp. (GM.N: Quote, Profile, Research) to buy a 51 percent stake in the automaker's finance arm if GM's credit rating falls below CCC, the finance unit's chairman said.

[Driveshaft]

Good. This should at least make things a little bit easier at GM. Not much, but maybe a little breathing room.

I just hope it's not the 12th hour for GM, there seems to be hope to turn this thing around.