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GM to Sell Isuzu Shares, Maybe to Mitsubishi, Itochu

Posted on: Thursday, 30 March 2006, 12:00 CST

By Kyodo News International, Tokyo

Mar. 30--TOKYO -- General Motors Corp. has informed Isuzu Motors Ltd. that it will sell the bulk of its 7.9 percent equity stake in the Japanese truck maker as part of efforts to create resources for the American auto giant's corporate restructuring, Isuzu officials said Thursday.

GM, effectively Isuzu's top shareholder, and Isuzu have asked Mitsubishi Corp., Itochu Corp. and Mizuho Corporate Bank, all having close ties with the truck maker, to buy most of the shares, officials at the trading houses and the bank said, adding their companies are taking a good look at the proposal.

The Isuzu officials said the two automakers are to keep their business alliance in areas such as the development of diesel engines.

"The level of activity between the two companies continues to increase. GM would not expect any sale of its Isuzu shares to have any effect on this important strategic alliance," GM said in a statement.

With the planned sell-off of Isuzu shares, GM, the world's largest automaker, will drastically reduce its capital partnerships with all Japanese automakers, ties that date from the 1970s.

GM, struggling with sluggish sales, recently sold its stakes in Fuji Heavy Industries Ltd. and Suzuki Motor Corp.

The U.S. automaker holds about 90 million Isuzu shares valued at roughly 40 billion yen at Thursday's closing price of 436 yen, up 10 yen from Wednesday.

GM and Isuzu formed a capital tie-up in 1971, with the Japanese company playing a pivotal role in its worldwide strategy, especially in the field of developing trucks and diesel engines.

At one time, GM provided support to Isuzu when it fell into a financial crisis.

Isuzu had to withdraw from making passenger cars in the 1990s due to its slumping operations. But its business performance has been improving, partly backed by a recovery in domestic demand, with its per-share price recently moving above 400 yen, compared with a low of nearly 30 yen in 2002.

Last October, GM sold its entire 20 percent stake in Fuji Heavy Industries, with Toyota Motor Corp. acquiring the 8.7 percent stake to become Fuji Heavy's biggest shareholder.

In early March, GM sold 17 percent of its 20 percent stake in Suzuki Motor.

GM has been promoting job cuts, plant closures and other restructuring measures as it has been losing its U.S. market share to foreign rivals, partly because of poor sales of sport-utility vehicles and pickup trucks in the face of high gasoline prices.

As of the end of September last year, trading house Mitsubishi held a 0.2 percent stake in Isuzu and its rival Itochu had a 0.7 percent. The two companies have been involving in overseas sales of Isuzu vehicles.

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Copyright (c) 2006, Kyodo News International, Tokyo

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GM, ISUZF, 7202, GM, MMTOF, 7211, DCX, ITOCY, 8001, FUJHY, 7270, SZKMF, 7269,

Source: Kyodo News International, Tokyo

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