GM Sells 8.7% of It's Stake in Fuji Heavy to Toyota, Market (Update4)
Oct. 5 (Bloomberg) -- General Motors Corp., the world's largest carmaker, agreed to sell its $746 million stake in Fuji Heavy Industries Ltd. as the U.S. company struggles with rising losses and the threat of a lower credit rating.
Toyota, GM's biggest competitor, will pay about $315 million in cash for 68 million shares, or 8.7 percent, of the maker of Subaru-brand cars, GM said in a statement on PRN newswire. GM will sell 11.4 percent of Fuji Heavy, worth about $422 million at today's closing share price, on the market.
GM faces further losses in North America as consumers opt for vehicles from Toyota and Nissan Motor Co. Detroit-based GM's declining sales of sport-utility vehicles has prompted S&P to review the carmaker's debt rating, which it cut to junk earlier this year. The company's largest supplier, Delphi Corp., is asking GM for financial assistance to stave off bankruptcy.
``It's surprising how fast GM is selling off the family silver,'' said Graeme Maxton, a director of the Economist Intelligence Unit in Hong Kong. ``It rings alarm bells.''
GM owns 157 million shares, or about a 20 percent stake, in Fuji Heavy. GM also owns a 20 percent stake in Suzuki Motor Corp. and a 8.4 percent stake in Isuzu Motors Ltd. Both companies declined to comment.
Buyback
Fuji Heavy said it will buy back about 90 million of its shares on the market, paying as much as 57.6 billion yen and hold them as treasury stock. It will buy its shares on the market on Oct. 6, 7 and 11, it said in a statement. Toyota will pay about 520 yen a share for its stake in Fuji Heavy.
Fuji Heavy said it will have a one-time charge of 5 billion yen from canceling the development of a cross-over vehicle with GM's Saab unit. Fuji Heavy lowered its earnings outlook for the full year to a profit of 12 billion yen from an earlier forecast of 15 billion yen.
``We've had a good partnership,'' said Troy Clarke, president of GM Asia Pacific in a statement. ``There were not enough collaborative projects to sustain the alliance.''
GM's shares have fallen 25 percent so far this year and declined 3.1 percent to $30.08 yesterday in New York. Toyota's shares have risen 26 percent so far this year and fell 0.9 percent today to 5,250 yen in Tokyo. Fuji Heavy's shares have risen about 8 percent so far this year and gained 2.3 percent today to 540 yen.
GM's largest parts supplier, Delphi, may declare bankruptcy this week, the New York Times reported today. The parts maker is asking GM, its former parent, for $6 billion in aid, people familiar with the situation said earlier last week.
Fuji Heavy
Fuji Heavy generates about 90 percent of sales from its automobile business. The other 10 percent comes from Fuji Heavy's aircraft, industrial machinery and other units. The company, set up in 1917 as an aircraft maker, is expanding its aerospace and aircraft business to supply parts for Boeing Co.'s new 787 aircraft.
A stake in Fuji Heavy will give Toyota access to the company's technology for batteries which can be used in hybrid gasoline-electric cars. Toyota aims to boost production of hybrids to 1 million by the early part of next decade. It sold 134,700 hybrids last year.
Fuji's Technology
``Toyota is not the kind of company that will buy shares without a business purpose,'' said Atsushi Osa, who helps manage $110 billion at Sumitomo Mitsui Asset Management Co. in Tokyo. ``It will gain from investing in Fuji Heavy if it gets technology that it doesn't have such as Fuji Heavy's batteries for hybrids and airplane technology.''
Tighter government restrictions on vehicle emissions and higher fuel prices are boosting demand for hybrids. Toyota has sold a record 106,978 hybrids in the U.S. so far this year, more than the 2004 total for all carmakers.
Hybrids such as Toyota's Prius and Honda's Civic are equipped with nickel hydride batteries made by Panasonic EV Energy Co. Fuji Heavy's Chief Executive Officer Kyoji Takenaka said in 2003 the company wants to sell its hybrid batteries to gasoline-electric makers, including Toyota.
Fuji's manganese lithium-ion batteries, being developed with NEC Corp., will last longer than Panasonic's nickel hydride batteries and handle temperature extremes better, Takenaka said in August 2003.
Nickel hydride batteries last about five to six hours, Takenaka said.
``Lithium-ion batteries are considered to be more fuel efficient than nickel hydride batteries partly because they are lighter and last longer,'' said Toru Iwai, an analyst at Credit Suisse First Boston Japan Inc.
Source: Bloomberg
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