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Hummer sale gears up

2008-08-22 09:24

General Motors is readying sales documents for its Hummer brand and has initial expressions of interest from potential buyers that it hopes to develop into formal sale talks, the automaker's CEO said on Thursday.

GM Chief Executive Rick Wagoner said the formal sale process for Hummer had not yet begun.

"We haven't really fired the starting gun, but I hope to do so soon," he told reporters at an event at GM's small-car assembly plant in Lordstown, Ohio.

Analysts and bankers have said they expect the military-derived Hummer brand to be a tough sell for GM, which aims to raise up to $4 billion in asset sales through 2009 as part of a plan to conserve cash and ride out a brutal downturn in US sales.

GM's US sales were down 18 percent through July, and analysts have raised concern about a cash burn at the top US automaker that reached $3.6 billion in the latest quarter.

Wagoner said GM had heard from "a number of people who have expressed interest" in Hummer. He said GM promised to return to them when the offering memorandum for the brand was complete.

"That will happen pretty quickly from now," he said.

In addition to asset sales, GM is looking to borrow up to $3 billion as part of a plan to cut costs and conserve liquidity by the end of 2009 even as it invests in new fuel-saving small cars and the all-electric Chevy Volt.

Federal loans

As part of that effort, Wagoner said GM was interested in pursuing federal loan guarantees that could be made available under energy legislation passed by the US Congress last year. But he said the automaker was waiting for regulators to write the rules that would govern any such borrowing.
He declined to say how large a loan guarantee GM could seek for itself or suppliers.

"I think it's fair to say in the times that the industry's in, and with the massive investment that we have in front of us as we retool, support in the form of loan guarantees would be most appreciated," Wagoner said. "At this point, no plan is specifically in place that's operating. I don't think anything's nailed down yet."

Capital markets, he said, have not opened up enough to let GM push forward with its borrowing, making it more important that it take other steps to conserve cash by cutting costs.

"With the capital markets we've had fits and starts of opportunities but they haven't opened up robustly," he told reporters. "I hope that happens soon, but we can't bet on that. We have to take actions in our own hands."

GM's efforts to raise money by selling assets and focusing on passenger vehicles haven't always ended happily - even when the automaker has signed memorandums of understanding in hand.

Just this week, Navistar International said a tentative agreement it struck late last year to buy GM's medium-duty truck business had expired without the two companies ever inking a final deal.

Citing "significant marketplace and economic changes" since the memorandum was signed, the truck and engine maker said the companies decided not to renew the pact, which had been seen as a way for Navistar to extend its dominance in medium-duty trucks and for GM to raise some of that $4 billion.

The breakdown came because Navistar planned to move production away from the Flint, Michigan, plant where hundreds of United Auto Workers employees assemble GM medium-duty trucks - sold under the GMC TopKick and Chevrolet Kodiak nameplates.

GM had originally promised to keep the plant open by moving production of a super-heavy-duty pickup truck to the facility.

But with fuel prices surging, demand for full-size pickups has fallen sharply and prompted the Detroit automakers to cut production of them. As a result, plans to introduce new, even bigger trucks are on hold, if not off the agenda altogether.

That prompted the UAW local to say it would not be able to agree to a new contract because of uncertainty surrounding the sale - raising the possibility of fresh strife with a union that GM needs on its side as it restructures operations.

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